Many Australian dairy farmers have been hard hit by the impacts of a deep and persistent trough in international dairy markets after late cuts to farmgate prices by some processors in the southern, export-focused states.
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According to Dairy Australia’s latest Situation and Outlook report, an already challenging season due to dry conditions has become significantly more difficult as the effects of the price reduction continue to unfold. Farmer confidence has been impacted; with flow on effects for on-farm investment and likely future growth.
“There is little doubt that managing short term pressures to achieve longer term business plans will prove a greater challenge than usual in the months ahead,” Dairy Australia senior analyst John Droppert said.
Confidence among farmers measured by the National Dairy Farmer Survey (NDFS), conducted in February and March, showed a decline in the proportion of farmers feeling positive about the future of the industry from 74 per cent to 67 per cent.
A recent supplementary survey suggests the number of farmers feeling positive about the industry has now dropped below 50 per cent.
Angledale dairy farmer Norm Pearce said the general feeling among Bega Valley farmers at the moment was “conservative”, with concerns about the lower milk price.
He said this meant farmers were going to watch their spending on such things as electricity and there probably was not going to be much machinery bought over the next year.
“I’ve been milking cows for almost 40 years and when things are tight you don’t spend much,” he said.
Mr Pearce said he met with Bega Cheese executive chairman Barry Irvin in March, who foreshadowed that next year could be tough for the region’s farmers.
“We have been a little bit prepared for it, but how bad it will be in Bega we don’t know,” Mr Pearce said.
However, he was still pretty positive about the industry as he still saw a large demand for cheese across the world.
National milk production is expected to be down about two per cent for the 2015/16 season to between 9.55 and 9.65 billion litres.
The outlook for 2016/17 is heavily dependent on seasonal conditions, but a further two to five per cent fall in production is anticipated.
Despite overall national milk production tracking below the levels of last season since early spring, 2015/16 milk intakes across NSW and Western Australia are higher in year-on-year terms.
On the international front, dairy demand has recovered in most importing regions over the past 12 months, with the overall volume of dairy trade up nearly six per cent.
China has been responsible for a large proportion of this growth, with total exports to the country up 16 per cent in volume.
Exports to South East Asian markets have continued to grow, with strong expansion in milk powder categories, while export volumes to the Middle East and Japan have eased slightly.
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