Australia: Anticipated Downturn in Milk Prices Poses Challenges for Dairy Industry
Source: The DairyNews
John McLean, former Managing Director and CEO of Warrnambool Cheese & Butter, forecasts difficult times ahead for the dairy sector, with the opening price for milk solids expected to decline by approximately 25% to around $7.50 per kilogram.
This anticipated price drop, from last year’s $9.50 per kilogram, reflects broader market trends impacting the dairy industry both domestically and globally.
McLean, who successfully predicted Australia’s shift towards becoming a dairy importer, highlighted recent statistics showing the country imported 350,000 tonnes of dairy products, including butter, cheese, and ice cream, marking an increase in dairy imports over exports. He expressed concerns over the economic outlook, cautioning that the so-called "dark clouds on the horizon" might herald more than just weather changes, particularly affecting those in the export markets.
The domestic market may offer some respite as major Australian dairy companies maintain a strong presence locally, with supermarket home brands increasingly competing with local dairy products on price. Despite efforts to maximize returns to farmers, McLean noted that escalating costs for essentials like power, fuel, and wages are taking a toll on the industry.
Adding to the industry’s challenges are the high costs of gas for companies using milk powder dryers and the worsening seasonal conditions that have led to exorbitant hay prices and poor feed quality. McLean stressed the severity of the situation, stating, "Farmers are facing a season they have not faced for some time."
In light of these difficulties, Saputo Dairy Australia recently issued early guidance for the 2024/25 season, projecting milk prices between $7.80 to $8.00 per kilogram of milk solids. These figures are set against a backdrop of ongoing global volatility and shifting market returns, with official opening prices expected to be announced in early June by Australian dairy companies.
McLean, who successfully predicted Australia’s shift towards becoming a dairy importer, highlighted recent statistics showing the country imported 350,000 tonnes of dairy products, including butter, cheese, and ice cream, marking an increase in dairy imports over exports. He expressed concerns over the economic outlook, cautioning that the so-called "dark clouds on the horizon" might herald more than just weather changes, particularly affecting those in the export markets.
The domestic market may offer some respite as major Australian dairy companies maintain a strong presence locally, with supermarket home brands increasingly competing with local dairy products on price. Despite efforts to maximize returns to farmers, McLean noted that escalating costs for essentials like power, fuel, and wages are taking a toll on the industry.
Adding to the industry’s challenges are the high costs of gas for companies using milk powder dryers and the worsening seasonal conditions that have led to exorbitant hay prices and poor feed quality. McLean stressed the severity of the situation, stating, "Farmers are facing a season they have not faced for some time."
In light of these difficulties, Saputo Dairy Australia recently issued early guidance for the 2024/25 season, projecting milk prices between $7.80 to $8.00 per kilogram of milk solids. These figures are set against a backdrop of ongoing global volatility and shifting market returns, with official opening prices expected to be announced in early June by Australian dairy companies.
