March 5, 2008

Australian dairy poised to recover amidst declining world prices

As global prices for dairy products weaken, compounded by drought and high feed costs, Australian Bureau of Agricultural and Resource Economics (ABARE), said the dairy market could recover over the next four years.

The bureau predicted a 2-percent growth in milk production to 9.25 billion litres for 2009, rising to 11.6 billion litres in 2012-13.

Australia's farmgate prices are expected to remain high in the mid-term, with milk prices rising to 54 cents a litre in 2008-09.

However, these are expected to fall to 51 cents a litre in 2012-13.

Higher prices for cheese and milk powders in the global market are expected to encourage farmers to rebuild dairy herds and increase production capacity.

ABARE pointed that this growth could be tempered by uncertainty surrounding irrigation allocations in the southern Murray-Darling basin and fodder prices.

The dairy product mix and output will be controlled by changes in returns from those products. Overall export volumes are predicted to increase by 7 percent to US$3.8 billion for 2008-09, and US$4.6 billion by 2012-13.