August 3, 2010
Australia's dairy sector sees better prospects
Australia's dairy operating conditions had improved dramatically after last year's near-crisis with improved milk payouts, lower grain prices, autumn rain and increased water allocation in northern Victoria, according to the industry body Dairy Australia.
But national milk production was expected to fall again this year because of reduced herd sizes and farmer debt.
General manager of trade and strategy Chris Phillips said national production was expected to grow only 1-2% for the next few years.
Like New Zealand, Australia accounts for about 2% of world milk production, but ranks fourth in terms of world dairy trade with a 9% share, behind New Zealand which is second with 21%. Australia exports 45% of its milk, New Zealand around 95%.
New Zealand dairy giant Fonterra, Australia's second-biggest milk processor by volume, is offering suppliers a milk price 30 % higher than this time last season, at AUD4.83 a kilogram of milk solids. Fonterra Australia managing director of ingredients Bruce Donnison said supply to the firm was up 1% on this time last year.
Dairy Australia said milk production had fallen from 11 billion litres at its peak nine years ago, to nine billion litres in the 2009-10 season just ended. The national herd had shrunk from two million cows to 1.6 million in that time.
Sustained drought, water shortages in northern Victoria and a slump in world dairy-market prices, which led to a big fall in milk payouts in 2009, had battered farmer confidence and increased debt levels in the sector, Phillips said.
"Improved world market conditions will encourage farmers in the southern, export, regions to increase production, but it will come off the back of limited herd numbers and higher debt levels," he said. "Until farmers see the return to better and improved international market prices are sustained, they are not going to rush back into expanding their herds."
A recent survey showed average farm debt had risen 20% compared to two years ago.
