Comparatively high farm gate milk prices and favourable weather in some regions ensured the 2023-24 season finished strong for Australian dairy farmers, however the outlook is more cautious for the remainder of the current season, according to Dairy Australia’s latest Situation and Outlook report.
The December 2024 report shows that since the start of the 2024-25 season, lower farm gate milk prices have increased margin pressure for dairy farm businesses.
This has also improved the competitiveness of Australian dairy products, coinciding with export conditions strengthening and volume growth in domestic retail sales.
Milk production has continued to grow relative to last season, however Dairy Australia analysis and insights manager Eliza Redfern said while profitability last season was strong overall, persistently high operating costs and ongoing climatic challenges were likely to impact milk production this season.
“The profitability of Australian dairy farming businesses was high over the 2023-24 season, as revealed by Dairy Farm Monitor Project data,” Ms Redfern said.
“However, while conditions were relatively favourable in some regions, others across southern Australia began to dry.
“In the drier regions, feed inventories were drawn down heavily, contributing to the higher fodder prices seen this season.”
Dairy farms in western Victoria, South Australia and areas of Western Australia in particular have been affected by drier conditions, an issue starting to impact parts of other regions after lower-than-average rainfall in October.
National milk production has continued to grow relative to last season, but without rain, the drier conditions, lower incomes and longer-term challenges around labour and farm exits are likely to hinder further increases.
“National milk production increased 1.3 per cent year-on-year in October, tracking +1.7 per cent on a season-to-date basis,” Ms Redfern said.
“However, given the climatic conditions, Dairy Australia continues to forecast a slight drop in the national milk pool relative to the previous season, to 8.3 billion litres in 2024-25, with the potential to steady should drier regions receive better-than-expected rainfall.”
The report also confirmed that Australian dairy products have seen their price competitiveness improve this season, coinciding with more favourable export opportunities.
Global demand has risen for Australian and New Zealand dairy, with higher commodity prices for fats and lower Northern Hemisphere production supporting higher farm gate milk prices in key export competitors including NZ, the United States and European Unon, with farm gate prices sitting higher than Australia.
However, buyers in most key importing countries remain price sensitive and economic constraints in China are persistent, while ongoing geopolitical uncertainty is also influencing global markets.
Local market conditions have improved for Australian dairy products as well, with the volume sold of cheese, dairy spreads and yoghurt in retail all increasing (3.2 per cent, 3.4 per cent and 7.0 per cent, respectively), while milk holds steady.
However, value growth in key dairy categories is under pressure from renewed discounting of retail prices for private label dairy.
The comparatively high international prices are considered likely to deter Australian-based importers, suggesting Australian dairy should remain competitive in domestic markets.
For more information and to view the latest Situation and Outlook Report, visit: https://dairyaustralia.com.au/sando