Welcome to the first edition of the Elders Dairy Market Update, it’s been a busy week in the dairy industry with plenty of news to cover.
Opening milk prices for the 2023/24 season have become clearer this week, but it may not be the outcome producers were looking for. Bulla and Lactalis had provided the initial guide on price with both companies announcing opening prices 6-7 per cent (pc) lower than this seasons price.
The expectation from the market heading towards the 2 PM 1 June deadline was that the southern region weighted average farm gate milk price would fall by at least 7 pc, from $9.60/kg milks solids (MS) to $8.93/kg MS. This was confirmed first by Fonterra announcing the exclusive supply 2023/24 opening weighted price of $8.65/kg MS, 9.6 pc lower than Fonterra’s 2022/23 weighted average milk price.
Competition for milk supply remains very high in Australia due to supply reductions, meaning that farm gate milk prices are somewhat detached from the world market. Despite the decline in opening prices for 2023/24, farm gate milk prices remain above long term averages. However, producers have been subject to increasing input costs and scarce labour availability which has tightened profit margins. These factors, combined with rapidly appreciating land prices offering opportunity to sell, have led to the expectation that milk supply will fall again in 2023/24 further increasing competition for milk supply.
This week we spoke to Elders Rural Products Specialist, Jim Reeves who manages animal health sales at our Maffra branch in Victoria. Jim services several dairy clients and grew up on a dairy farm himself. Read his story here.
You may have also caught our Livestock Production Advisor, Nathan Saunders on our social media this week with a great insight into what a day in his role looks like. Nathan works out of Scotsdale in Tasmania and has a wealth of knowledge on dairy production systems. You can read about Nathan’s role in an interview he did last year for Elders.
Milk Production
The latest supply figures from Dairy Australia show Southern states (VIC, TAS and SA) experienced an increase in supply in April, increasing by 0.1 pc to 455.2 million litres. The increase was driven exclusively by Victoria, increasing by 1.9 pc to 340.1 million litres compared to March. Year on Year (YoY) Tasmania has recorded an increase in supply of 2.3 pc ,whilst Victoria has recorded a decline of 6.9 pc and South Australia a decline of 4 pc. Seasonally, Victoria is expected to lift production levels in May and June.
In northern states (NSW and QLD) supply contracted 3.2 pc to 96.5 million litres in April compared to March, driven primarily by a 3.3 pc decline in NSW. This continued a declining trend in overall production, down 9.2 pc YoY. In the West, WA milk production declined 3.4 pc in April to 26.2 million litres. Year to date production remains relatively flat at 0.8 pc below the previous season.
Source: Dairy Australia
Inputs
Hay prices remain elevated compared to this time last year ,however there were examples of prices easing in the Goulburn Valley and Gippsland regions this month. Demand for fodder remains relatively high with cross industry competition from livestock enterprises.
Source: The hay report is produced for Dairy Australia by the Australian Fodder Industry Association (AFIA) – the national independent voice for the Australian fodder industry which connects the entire supply chain from seed to feed. For further information: www.afia.org.au
Grain
Feed grain prices shifted higher this month in most states, however supply remains relatively high against year ago levels keeping price below this time last year.
Source: Clear Grain Exchange
Water
Temporary water markets are currently very slow, but indicative pricing is as follows:
Source: Elders Water Market Update
Source: Elders Water Market Update
Export markets
Global Dairy Trade (GDT) reported a decline in price for both skim milk powder (SMP) and cheddar in the most recent auction event. Both commodities remain well below year ago levels. SMP averaged $2,766/t in the latest auction in May, which is 32.8 pc below the same time last year. While cheddar prices averaged $4,407/t, which is 21.8 pc below year ago levels. The current trend in global prices remains flat against a backdrop of increased supply and lower levels of demand from key importing countries such as China who have increased their own production levels.
However, there are signs that milk production is falling in all major exporting countries. Milk production in Australia and New Zealand has been falling for the past three years despite high farm gate prices and favourable seasonal conditions. The trend is tipped to continue which could impact export markets over the long term.
Source: Global Dairy Trade
The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.