A shortage of feed and fodder will prevent any chance of a sustained recovery in milk production in the 2018-2019 season, a Rabobank report says.
The bank’s recent Dairy Quarterly report said Australian milk production was expected to trail last season through the 2018 third quarter by 3.5 per cent, finishing the season down about two per cent at 9.1 billion litres.
The feed shortage has also prompted a spike in culling activity with the number of dairy cows sent to slaughter nationally up 14 per cent, year on year for the month of July, the report said.
The bank’s forecast for the full-year average farmgate milk price was $5.90 kilogram milk solids.
On the international outlook for dairy, Rabobank said the combined year-on-year milk supply growth across the ‘Big 7’ dairy exporters, (the European Union, United States, New Zealand, Australia, Brazil, Argentina, and Uruguay) slowed during this year’s third quarter to just one per cent.
Rabobank dairy analyst Emma Higgins said international milk supply will grow only modestly year-on-year during the coming 12 months, driven by tight margins on-farm and lingering effects of adverse weather.
“Surplus dairy available for export will significantly tighten for an extended period, which will provide some upside to pricing across the dairy complex,” Ms Higgins said.
Another Rabobank agribusiness specialist Michael Harvey said the constraints on Australia’s milk supply could limit its ability to benefit from the growing market for cheese in Asia.
Mr Harvey said Australia faced robust competition from other dairy exporters and needed to “play to its strengths” by focusing on high-end segments of the market.
He said dairy innovations and formulations were the way forward, such as tailored products that improved functionality and desirability to suit local cooking styles, clean label initiatives, nutritional demands (such as sodium reduced) and the development of snacks suited to Asian tastes.
Australia’s cheese production has grown in recent years, accounting for more than half the capital expenditure in dairy processing since 2015.