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Signs of slow recovery in the dairy sector

Bank warns of more volatility with opportunity to come

Kristy Moroney

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According to the regional focused bank, the dramatic milk price cuts in mid-2016 finally saw prices gradually creep upwards during the second half of 2016 with some signs of recovery for milk producers. With decreased milk supply in the southern hemisphere, Rural Bank said this marks an opportunity for dairy farmers to review their business and supply arrangements.

Painting a picture of an industry in recovery, Rural Bank said decreased supply is also combined with a six per cent increase in skim milk powder production, and almost 2% increase in milk yield per cow.

However, while the rejuvenation of the industry is gathering pace, it is by no means out of the woods just yet, with Victorian and Tasmanian dairy farmers’ experiencing 70% and 12% falls in gross incomes respectively in 2015/16. 

General manager agribusiness for Rural Bank, Andrew Smith, said caution must be taken when forecasting the future of the Australian dairy market as it is inextricably linked to a global dairy market currently experiencing historically high levels of supply and slow price recovery. 

“The only constant in agriculture is change, and this is no different for the Australian dairy industry. While we know dairy farmers are doing it tough at the moment, we have not seen the predicted mass exodus of farmers from the industry. On the contrary, while many farmers are in a consolidation phase, in some instances we’ve actually seen dairy farmers invest in and expand their businesses,” Mr Smith said.

“While Australian skim milk powder production has increased significantly year-on-year and export demand from China and Vietnam for Australian milk powder is likely to increase in 2017, the dairy industry as a whole still faces huge challenges as it continues to grapple with low milk prices and high levels of supply,” he said.

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