Australian milk production to hit 20-year low

15.12.2016

Dairy production in Australia will hit a twenty-year low next season, as falling milk prices encourage farmers to reduce their herds, US officials said.

The US Department of Agriculture's Canberra bureau saw Australian production under pressure from the combined effect of prolonged dry conditions, as well as low prices.

Production in 2017 was forecast at 9.3m tonnes, thanks to the "smaller dairy herd and exits from the industry".

"Average dairy farms incomes fell significantly over 2016 due to lower farm gate milk prices and lower milk production per farm," the bureau said."

The bureau saw milk production in 2016 at 9.5m tonnes, below the official forecast of 9.7m tonnes.

Low prices bit on production

"In recent years, the industry has been affected by adverse seasonal conditions and low international dairy prices," the bureau said.

Low global milk prices are starting to bit, with cuts for farm gate milk production.

"The Australian dairy industry has been partially insulated by the decline in international dairy prices with around 60% of production consumed on the domestic market."

"However, in April 2016, the major processors cut farm gate milk prices," the bureau said.

"Following the cuts to milk prices, some of which were retroactive, many farmers became unprofitable and in response culled dairy cattle and removed cows from production."

Improving pasture prospects

But the bureau did note a "more positive trend" for dairy production, thanks to improved weather and pasture growth since mid-2016.

"Heavy rain across much of eastern Australia has broken the drought-like conditions in some regions and reduced the need for feed supplements," the bureau said.

"The three-month rainfall forecast to December 2016 is also positive, although intense rain in some regions and waterlogging could affect dairy production," the bureau said.

"Pasture growth is expected to be both significant and sustained in in Victoria, which accounts for 60% of the national dairy herd.

The bureau said that the better conditions were "likely to reduce herd culling over 2017 and pave the way for gradual herd rebuilding".


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