Analysis undertaken by Dairy Australia as part of the Update has also revealed instability within the world’s major developed economies, raising questions about the possible likelihood of another financial crisis and the impact it could have on dairy.
In an update of the February-March National Dairy Farmer Survey conducted in late August, 78% of farmers are feeling positive about the future of the industry, compared to 72% when surveyed in February.
Dairy Australia’s manager strategy and knowledge Joanne Bills said seasonal variation had continued across regions, with southeast Australia the most confident off the back of strong southern opening farm gate prices and favourable operating conditions. However, farmer confidence in northern Australia, in particular NSW and western Australia, is yet to make a big improvement as the regions still grapple with the supermarket price war, floods and drought.
“On the whole, the 2011/12 season has started positively, with southern opening farm gate prices 3-5% higher than last year, and 60% of farmers we contacted described their season as ‘about where they would like it to be’,” says Bills.
Analysis undertaken by Dairy Australia as part of the Update, forecasts a 1.5% increase in 2011/12 national milk production to 9.25bn litres. Despite a slow start to the season due to wet weather in Victoria, and flood and drought recovery in Queensland and Western Australia, production is expected to gain momentum as the season progresses.
China, Asia and the Middle East continue to drive international dairy demand. However, Bills said international dairy commodity prices had softened in recent months on the back of increasing global economic and financial concerns, increasing supplies from New Zealand and Latin America and production growth in the US and EU.
Whole Milk Powder (WMP) prices, as measured by Dairy Australia’s spot commodity price series, have fallen 16% from their peak earlier in the year, while Skim Milk Powder (SMP) and butter spot prices have fallen by 8% and 10% respectively.
“While these falls are not insignificant, prices remain historically high, and after initial falls from their peaks, price movements have been limited, despite improvements in supply,” says Bills. “In view of the global economic turmoil, the international dairy market has remained remarkably stable and could stay that way if demand from China, Asia and the Middle East continue to grow.
“China will continue to be an important driver of dairy demand in the outlook period in two ways: directly through imports of WMP and other dairy ingredients, and indirectly by supporting economic growth in the region and the wider global economy.
“The threat of a renewed global financial crisis and what this might do to currency markets and demand for dairy products is the key challenge in the outlook.”
Source: Dairy Australia
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