Dairy industry analysts are taking a positive outlook for the milk season ahead despite drops in local farmer confidence earlier this year.
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Rabobank said a fall in milk supply growth out of Europe and the United States had led it to forecast a full-year price of $6.40 a kilogram milk solids for the 2018-19 Southern Australia farmgate milk price.
Dairy Australia was also upbeat about the season ahead with its June Situation and Outlook report saying poor spring conditions in the northern hemisphere had hit global supply.
DA senior industry analyst John Droppert said this had put upward pressure on commodity prices which was expected to result in better prices at the farmgate.
But he said a dry late summer and autumn had driven up operating costs and were expected to limit any short term impact on local farmers’ balance sheets.
“Six months ago, a predicted oversupply coming out of Europe was weighing heavily on milk price forecasts, particularly for WestVic and the other predominantly export-focussed regions,” Mr Droppert said.
Saputo, which owns Murray Goulburn and Warrnambool Cheese and Butter, got off to a conservative start with its prices for 2018-19, this week announcing an opening price of $5.75 kgms.
Fonterra has yet to set its opening price but did say last month its forecast closing price for the next season was expected to be within $5.50-$6.20 kgms.
Meanwhile, the National Dairy Farmer Survey showed south west Victoria was consistent with a national trend of sliding confidence levels among dairy farmers. It was undertaken early in March, shortly before the St Patrick’s Day fires ripped through farms across the region’s farming community.
The survey found 45 per cent of local dairy farmers remained positive about the industry, down from 59 per cent last year and 61 per cent early in 2016. Nationally, confidence levels had slipped to 47 per cent.
“Low farmgate prices was the main factor impacting on negative sentiment among dairy farmers in south-west Victoria, followed by high input costs,” Mr Droppert said.
Despite decreased confidence, 66 per cent of the region’s dairy farmers expected to make a profit in 2017-18, with 59 per cent recording a profit in the 2016-17 financial year.
Rabobank senior dairy analyst Michael Harvey said a rally in global dairy commodity prices, and expectations for the Australian dollar to ease slightly, had led it to increase its full-year forecast for 2018-2019 to $6.40/kgMS.
He said global demand and supply for dairy commodities were expected to remain well-balanced for the next six months.
