February 17, 2014

The outlook for global demand for dairy, particularly in China, remains robust while Australia's farm gate milk prices are up around 25% on last season.

Increased cash flow for dairy farmers is being directed to creditor payment and debt retirement despite the overall positive trends.

Australia's milk production trails 2012-13 in year-to-date data and is expected to finish the year at levels the same or slightly lower than those recorded in 2012-13, because of on-going issues from the challenging second half of the year.

Dairy ustralia is forecasting milk production of 9.0-9.2 billion litres for the 2013-14 season, a contraction of between 0-2%.

Australian dairy heifer exports are still in high demand with live cattle exports up 12% to around 85,000 head in the year to November 2013 with China the major buyer (79%) followed by Pakistan (10%) and Russia (4%).

On global currency movements, the weaker Australian dollar is likely to place upward price pressure on imports such as fertiliser and fuel while Australian grain and fodder prices remain elevated.