While there were elements in the global dairy market that could present obstacles to a rise in local farmgate milk prices this year, there was a possibility of an upswing in the regional market for milk, an agribusiness chief says.
Speaking at the 2018 Sungold Field Days, ANZ head of agribusiness Mark Bennett said the proposed sale of Murray Goulburn (MG) to Canadian dairy giant Saputo (which owns Warrnambool Cheese and Butter) could benefit dairy farmers by creating more competition for milk.
While the sale of MG to Saputo would reduce the number of major south-west dairy processors from three to two, dairy farmers could benefit if there was healthy competition between Saputo and Fonterra, the other remaining major south-west dairy processor, Mr Bennett said.
“It depends on how healthy that competition is between two players rather than three,” he said.
“If they are bigger, stronger companies that can go to the market,” there were opportunities for farmers to benefit from the growth created, Mr Scott said.
”Where there is a battle for supply, there is potential for the local market to not be as bearish,” he said.
But he said Saputo’s bid to acquire MG still faced hurdles before it created the “new world” in the Australian dairy industry.
The bid had still to be approved by a majority of MG shareholders, the Australian Competition and Consumer Commission and the Foreign Investment Review Board, Mr Bennett said.
He said apart from the possibility of strong local demand for milk supply, another bright light for the Australian dairy industry was the drop in New Zealand’s milk production because of difficult seasonal conditions there.
Factors that might count against any immediate upturn in milk prices included the big inventory of dairy commodities that had accumulated in the global dairy market, Mr Scott said.
“Most people are still concerned about the volume (of milk) from Europe and the United States,” he said.
“It’s been a difficult environment,” Mr Bennett said.
He said the value of the Australian dollar was staying around the high US70 cents to US80c, which was also working against more exports of Australian dairy commodities.
While there had been two recent increases in the global price of dairy commodities, they had come after a longer period of price decline, Mr Bennett said.
Another steadying factor was that while current seasonal conditions had been good, many dairy farmers were still recovering from the dairy crisis of 2016, he said.