Dairy Australia says it is expecting an overall drop in milk volume production for the 2015-16 season of between 1 and 2 per cent.
The group said in its February Situation Outlook that a lack of global demand and higher input costs such as feed and water, were keeping production subdued.
Dairy Australia analyst John Droppert said any price step downs from processors were now less likely.
“The bulk of the milk is in for the season, and it’s now unlikely from our perspective that the processors would be looking to do something so dramatic at this point in the season,” Mr Droppert said.
“It’s probably more likely that if we continue to see a soft market, that next season’s prices may come under pressure.”
Feed costs up
Prolonged dry weather slashed Victorian grain yields during the last year.
Mr Droppert said the lack of rain had brought with it increased feed costs for farmers.
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“It’s been a really dry year for most of the season, from spring onwards, across most major production regions, especially in Victoria and Tasmania,” he said.
“The feed pasture growth has slowed down a bit earlier than usual and pretty sharply in some parts.
“That’s come at a time where hay supplies have been under pressure and grain is pretty expensive as well.”
Milk production increasing elsewhere
While Australian milk production is tipped to decline, Dairy Australia expects northern hemisphere production to experience continued growth.
That comes as global markets adjust their demand for imported dairy products.
“Global demand hasn’t really improved as we might have expected it to,” Mr Droppert said.
“In particular, China’s staying fairly subdued.
“Russia, the other biggest market, has been largely out of the market as a result of the various foreign policy and trade policy issues going on there.
“That’s not so unexpected but certainly China has been a bit of a surprise but the supply side issues have also been pretty significant.”
Source: ABC News
