Drought and Feed Costs Push Dairy Prices Higher
Low rainfall and high temperatures have reduced water available for irrigation and livestock across several production basins. The resulting shortage of pasture has increased operating costs at dairy farms and reduced milking volumes, according to livestock organisations and dairy processors. They said the effects could extend to both fluid milk and processed dairy products.
Feed is the largest cost item for a dairy farm, accounting for more than 60% of total operating expenses. With pastures drying out and harvests of key forage crops—including silage maize, oats and alfalfa—falling, farmers have replaced natural grazing with purchased bales and balanced concentrates. Those products are being bought at higher prices, while farms are also paying more to draw water from deep wells and to run fans and sprinklers continuously during periods of heat.
The conditions have affected animal performance as well as farm costs. Heat stress and inadequate nutrition have reduced the average litres produced per cow each day. High temperatures have also lowered the concentration of useful milk solids, including butterfat and protein, reducing the industrial yield available for cheese and cream production.
As the amount of milk collected in producing regions has declined, pasteurisers and cheese makers have competed for fresh raw material. That competition has increased the price paid to farmers per litre at the farm gate. Processors and small artisanal cheese businesses are also facing higher logistics costs, including the expense of maintaining the cold chain in unusually hot conditions.
Some processors have absorbed part of the increase to limit the effect on their competitiveness at retail outlets. But industry representatives said depleted inventories and continuing adverse weather would require gradual adjustments to prices for pasteurised milk, fresh cheeses and aged cheeses in convenience stores and local markets.
Producers have asked agricultural and government authorities for emergency measures, including subsidies for feed purchases, support for water-storage infrastructure and soft-credit facilities for family farms. Sector representatives said that if the situation in production basins is not addressed, some farmers could reduce their herds or sell productive cows earlier than planned. They linked that possibility to future concerns over domestic milk supply and the cost of basic food products.
