Drought and Demand Mean Mixed Australian Outlook

Extreme heat in western areas, flooding in the east and unfavourable input costings have caused problems for Australia dairymen as a strong Australian dollar limits export potential and milk discounting has extended to petrol stations and convenience stores.

Market experts at Dairy Australia (DA) have said the retail market reads positively although consumers remain cautious. Milk sales have risen 2.2 per cent since on this time last year and branded sales have risen 15 per cent.

Discounting milk has extended to convenience and petrol stores. Farmers have felt the pinch with electricity prices rising along with other inputs.

Exports

According to Dairy Australia’s February Dairy Situation and Outlook the US demand did not contract as much as expected. However, a strong Australian dollar is constraining exporter returns and dairy export capacity has been hit by unfavourable production conditions.

Longer term growth is expected due to demand in India and China developing as their economies grow. Demand for infant formula and dairy proteins has remained high.

Cows

Cull Cow rates are expected to continue a downward trend as low values (down 22 per cent on average) counter cull value benefits in the light of lower production margins.

Live exports have risen by four per cent to 77,092. This is despite on-going legal and political difficulties in China forcing shipment plans to fall through.
Subsequently local heifer markets have seen low prices due to abnormally high throughput.

Feed Grains

Global corn stocks remain stretched following weather disruption to Black Sea, US and UK crops last year. DA analysts predict this to continue until the South American harvest - starting around now - comes to fruition.

Delivered feed grains for Melbourne are up 46 per cent for wheat on last year at AUS$288/tonne and 30 per cent for barley at AUS$266/tonne.

Hay

Excellent hay and straw quality underpins high prices. Straw has been recommended as a good fodder option as Asian demand has caused a hay price step of AUS$ 10- 30/ tonne over 2012 levels.

Fertiliser

Weather issues have weakened already low demand keeping prices in check.

Phosphate prices for December 2012 were 16 per cent lower than the previous year; urea was also 17 per cent down.

Urea values are forecast to remain strong due to considerable northern hemisphere demand.