January 30, 2009
Australia dairy farmers to see milk price challenges
In Australia, the gap between export milk prices and domestic prices will expand significantly in the rest of the 2008-09 season, said Dairy Australia.
In fresh milk regions, contracted prices for 2008-09 increased 10 percent as processors seek to shore up regional supplies.
Domestic market exposure and current contract obligations indicate that the prices will hold for the current season, said Dairy Australia's latest Situation and Outlook report.
These domestic milk contracts could come under pressure when the contracts are renewed. The rapid decline in exports to the international markets has mirrored falls in many commodities amid the global economic slowdown.
The report said conflicting signals are still coming in from overseas markets. There is much potential volatility in the market outlook, as the global recession worsens.
Slowing economic expansion in China, a key dairy market, has further added to the uncertainty surrounding the Australian dairy industry.
However, easing production costs should soften the impact. Lower grain and fuel prices are expected to start flowing to the farmers in the coming months.
While the lower input costs will help protect margins, managing cashflows in the face of significant milk price cuts will be a challenge for dairy farmers for most of 2009.
