Australian dairy market to see shaky but profitable year

Australian dairy producers can expect a profitable year ahead thanks to record high milk pricing and favourable seasonable conditions but need to be award of risks of turbulence in the market, according to a recently published report by Rabobank titled ‘Be Confident, but Beware’.

The report argues that while local milk prices are supporting profitability and the fundamentals of the industry are remaining strong, a market correction may be on the horizon, with pressure from increasing costs and global events potentially causing problems in the future.

Prices are predicted to be high for the year for Australian milk exports, and Oceania-origin butter and cheese are trading at record levels. Despite this, the market is changing, with the world’s major dairy exporters all reporting lower milk production this year and Chinese bulk imports decreasing. Global and geopolitical events are expected to have an impact on the profitability and stability of the market as well.

Dairy companies, the report notes, will need to cautiously navigate these conditions, along with dealing with inflation and increased costs of dairy inputs.

Australia’s milk production has steadily fallen over the past year but should see a reversal on the trend for the next season, which may lead to momentum for the Australian dairy market and subsequently to a degree of stability.

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