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Australia’s Milk Season Off to Poor Start

Fran Howard

October 18, 2021

Rain has dampened the start of Australia’s milk production season. The country has now logged two back-to-back months of season-over-season production declines, but Dairy Australia, remains optimistic that 2021-22 production will match or exceed the previous season’s by as much as 2%.

According to Dairy Australia, August milk production dropped 3.6% below August 2020 levels to nearly 691 million liters, about 1.569 billion pounds. Every state in Australia recorded a production drop, except New South Wales, which posted an increase of 3.7%.

“The national decline was of similar in scope to that seen in July, the first month of Australia’s production year,” says Monica Ganley, analyst with the Daily Dairy Report and principal of Quarterra, a consulting firm in Buenos Aires. However, with the bulk of the production year still ahead, Ganley says that plenty of time remains for output to improve.

“Favorable economics for Australian producers are expected to support future milk production growth. Unlike producers in many corners of the globe, Australians are benefitting from lower input costs,” Ganley says. “Strong production of concentrates and forages last year has left many producers with feed supplies to start the year.

Meanwhile, plentiful rains have favored pasture growth and could reduce producer dependence on purchased supplemental feed.”

At the same time, though, rising fertilizer prices along with an increase in some crop diseases could create some challenges moving forward. However, Ganley notes that lower feed costs will likely outweigh these challenges and motivate Australian producers to increase output yet this season.

While the share of Australia’s milk supply that’s exported has dropped over the past decade, the country still exports about one-third of the milk it produces each year, making it the world’s fourth largest dairy exporter.

“Despite lower milk production, Australia’s exports have increased in 2021, presumably leveraging stocks produced during the 2020-21 season,” Ganley notes. Between July and August, Australia exported 158,134 metric tons (MT) of dairy products, an increase of 23.1% compared to the same period last year, according to Dairy Australia.

“Fluid milk exports alone rocketed 51.4% higher than the same period last year due to insatiable demand from China. If milk production does indeed improve later in the production year, Australian exporters will be well positioned to move additional volumes into global markets and potentially provide strong competition for other global dairy suppliers,” she adds.

According to a report released by the Australian Dairy Products Federation in September, Australia’s dairy industry is a significant contributor to Australia’s economy. The report notes that the country’s dairy manufacturers generate $15.7 billion in revenue and contribute $12.4 billion, or 1%, to Australia’s gross domestic product. In terms of employment, the dairy processing industry contributes a total of 70,158 full-time equivalent jobs.



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