Australian Dairy Sector Faces Challenges Amid Fonterra's Divestment and Declining Farm Numbers
Source: The DairyNews
The Australian dairy sector is navigating turbulent times as Fonterra, a major player, announces plans to sell its Australian arm. This move comes amidst expectations of falling farmgate milk prices and a decrease in the number of dairy farmers. However, there are also promising aspects within the industry.
Fonterra's substantial presence in Australia, supported by approximately 1,600 employees and a nationwide network of suppliers, is set to change as the company explores divestment options for its global consumer business, including its operations in Fonterra Oceania and Fonterra Sri Lanka. This strategic reassessment reflects the cooperative’s new direction.
The global consumer business of Fonterra includes a robust portfolio of well-known dairy brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, and Perfect Italiano. Managing Director Rene Dedoncker assured that Fonterra will honor existing milk supply contracts during the transition period, with the sale expected to take 12-18 months to finalize.
The announcement coincides with concerns over anticipated decreases in farmgate milk prices for the upcoming season. Dairy processors, including Fonterra, cite subdued consumer demand both domestically and internationally as the main reason for this downward trend.
Rabobank forecasts minimum farmgate milk prices across the southern Australian manufacturing pool to range between AUS$8.00 (US$5.30) and AUS$8.20 (US$5.43) per kg milk solids for the upcoming season, representing an approximate 11% decline from current prices.
In the report "Walking a Tightrope," Michael Harvey, Senior Dairy Analyst at RaboResearch, highlights the challenges facing Australian dairy companies as they approach the new season's milk pricing deadline on June 3. Companies must balance the need to send strong price signals to suppliers against the backdrop of softer market returns.
Despite recent record-high prices and an apparent recovery in milk supply, the number of dairy farmers in Australia has sharply declined, especially in Victoria, the country's main dairy state, which accounts for around 66% of production. Recent data shows a drop to 2,774 dairy farms statewide by the end of the 2022-2023 financial year, down from 2,984 at the end of the 2021-2022 season. This represents a significant decline from the 4,284 farms recorded in the 2012-2013 season, a trend seen nationwide.
Despite these challenges, there are bright spots for Australian dairy farmers. Harvey anticipates that major input costs for feed production will remain lower heading into the new dairy production season. "Local feed markets appear well supplied," he noted, which is positive for farmers planning feed budgets.
Most purchased feed market indicators are trading below the five-year average, and good subsoil moisture levels on Australia's east coast bode well for a strong winter crop planting, leading to a neutral feed price outlook.
The global consumer business of Fonterra includes a robust portfolio of well-known dairy brands such as Anchor, Mainland, Kāpiti, Anlene, Anmum, Fernleaf, Western Star, and Perfect Italiano. Managing Director Rene Dedoncker assured that Fonterra will honor existing milk supply contracts during the transition period, with the sale expected to take 12-18 months to finalize.
The announcement coincides with concerns over anticipated decreases in farmgate milk prices for the upcoming season. Dairy processors, including Fonterra, cite subdued consumer demand both domestically and internationally as the main reason for this downward trend.
Rabobank forecasts minimum farmgate milk prices across the southern Australian manufacturing pool to range between AUS$8.00 (US$5.30) and AUS$8.20 (US$5.43) per kg milk solids for the upcoming season, representing an approximate 11% decline from current prices.
In the report "Walking a Tightrope," Michael Harvey, Senior Dairy Analyst at RaboResearch, highlights the challenges facing Australian dairy companies as they approach the new season's milk pricing deadline on June 3. Companies must balance the need to send strong price signals to suppliers against the backdrop of softer market returns.
Despite recent record-high prices and an apparent recovery in milk supply, the number of dairy farmers in Australia has sharply declined, especially in Victoria, the country's main dairy state, which accounts for around 66% of production. Recent data shows a drop to 2,774 dairy farms statewide by the end of the 2022-2023 financial year, down from 2,984 at the end of the 2021-2022 season. This represents a significant decline from the 4,284 farms recorded in the 2012-2013 season, a trend seen nationwide.
Despite these challenges, there are bright spots for Australian dairy farmers. Harvey anticipates that major input costs for feed production will remain lower heading into the new dairy production season. "Local feed markets appear well supplied," he noted, which is positive for farmers planning feed budgets.
Most purchased feed market indicators are trading below the five-year average, and good subsoil moisture levels on Australia's east coast bode well for a strong winter crop planting, leading to a neutral feed price outlook.