Australian dairy industry set to recover in 2018

Published 3 November 17

Australian milk production, which has seen a tight squeeze in the last two years, is expected to begin a recovery in 2018, according to USDA reports. Positive weather forecasts for the remaining months of 2017 are expected to support a gradual increase in milk production to a total of 8.8 million litres for the year, still 5.9% lower than the previous 3 years’ average. However, assuming average seasonal conditions, 2018 production is expected to be 9 million litres on the back of rising farm incomes and herd rebuilding. 

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Very low farm-gate prices in the past 2 years have affected profitability with over half of dairy farmers making a loss in 2016. 7% of farms ceased trading in the year to mid-2017, affected by poor seasonal factors, industry disruption and shrunken farm incomes. The outlook for next year is better with improved international and domestic milk prices helping to boost incomes, though capital investment is still likely to be constrained.

Although Australia’s milk production is only about 62% of the UK’s, its location makes it an important trading nation serving demand in the Asia Pacific region. It is the biggest supplier of dairy products to Japan and the second biggest supplier to China, after New Zealand. Dairy exports were down 2% in 2017 v 2016 on the back of a reduced milk supply but exports are expected to stabilise in 2018.

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