Low milk prices are forcing New Zealand producers to ease off production, but in Australia farmers are still increasing output.
Milk giant Fonterra reported on Friday that its Australian milk collections rose 1% year-on-year in September.
And the US Department of Agriculture’s Canberra bureau forecast Australian milk production to “rise slightly” to 9.8m tonnes next year, citing “higher milk yields and improved seasonal conditions”.
No need to cut output
Industry body Diary Australia this week said that prices had not yet fallen far enough to force a reduction in Australian output.
“Milk production continues to expand in Australia, with favourable seasonal conditions experienced in most regions,” Diary Australia said.
“Margins have tightened significantly this season, but remain positive for most farmers, so far allowing them to maintain or incrementally grow output.”
New Zealand pain
This makes a marked contrast to New Zealand, where production is sharply down.
Fonterra, which is by far the largest New Zealand milk group, reported that its collections in that country fell 9% year-on-year in September.
“Farmers continue to reduce stocking rates and supplementary feed to help reduce costs in the low milk price environment,” Fonterra said.
Dairy prices hit a 13-year low in August, as heavy global production met thin buying demand from key importers, including China and Russia.
Prices have bounced since then, but are just over half their 2013 peak.
Squeezed margins have encouraged farmers to cut costs, which can include reducing feeding, cutting fertilizer application on pasture, and cutting the number of milking a day to reduce labour costs.
All of these measures reduce the amount of milk cows can produce.
And low prices also encourage cow slaughter. The US Department of Agriculture has forecast the size of the New Zealand dairy herd to shrink in 2016, the first time it has done so in over a decade.
This week the US Department of Agriculture bureau in Wellington trimmed its forecast for New Zealand 2015 milk production by 19,000 tonnes to 21.39m tonnes, down 2.3% year on year.
And the bureau forecast production to fall by another 3.0% in 2016, marking the first time New Zealand output has fallen for two successive years since the 70s.
This would be the first time since 1973-74 that New Zealand production has fallen for two successive calendar years.
Move up value chain
But the mood seems to be considerable more positive in Australia.
“Lower world dairy prices could affect farmers in 2016 despite the significant depreciation of the Australian dollar over 2015,” said the USDA’s Canberra bureau.
“However, Dairy Australia’s 2015 National Dairy Farmer Survey (NDFS) reported that three quarters of dairy farmers are feeling positive about the industry’s future, a similar result in the previous year.
True, production of powder milk is forecast to fall, given low demand from the key commodity milk exporters, but an increase in higher value products has bridged the gap.
A market has opened up for liquid milk exports to China via airfreight, the USDA said, and cheese and butter exports are also up.
(Source – http://www.agrimoney.com/news/australian-dairy-farmers-defy-low-prices-up-production–8901.html)