October 16, 2012

Milk output is forecast to rise 1.2% in 2013 to 10.14 million tonnes following a bumper 4.7% growth in 2012 as farmers rebuild their dairy herds and cash in on increasing consumption of dairy products in Asia and the Middle East.

"Export-oriented processors [mainly in Victoria and Tasmania] are expected to step up production to meet world demand for dairy products," said the USDA's Agricultural Counselor, Joseph Carroll, in the report.

But it's in the cheese industry "where all the action is expected to be," said Carroll, as production is expected to climb 14% this year to 385,000 tonnes and to a further 390,000 tonnes in 2013. That, in turn, is forecast to drive a jump of almost a quarter in cheese exports to 210,000 tonnes next year, the report said.

"The global market is growing at 2.5% a year, but China is twice that," said Rabobank senior dairy analyst Michael Harvey in an interview. "It's from a small base, but it's a blistering rate in a very big market."

He forecasts that whole milk powder prices, as measured on a free-on-board basis in Oceana trade, will rise to US$3,800 a tonne by the first half of next year from around US$3,000 now.