Dairy pro­duc­tion on the up

Tasmanian Country - - THE STOCK REPORT -

AF­TER one of the tough­est sea­sons in years, the na­tional dairy in­dus­try is re­cov­er­ing, ac­cord­ing to the lat­est Dairy Sit­u­a­tion and Out­look re­port.

The re­port from Dairy Aus­tralia says de­spite the price volatil­ity that hit the 2016-2017 sea­son, farm­ers in ex­port-fo­cused states such as Tas­ma­nia have coped fairly well.

DA se­nior an­a­lyst John Drop­pert said the re­port re­flected the re­al­ity of the ups and downs of the in­dus­try over the past 12 months.

“2016-2017 was un­doubt­edly a tough sea­son for cash flow, but the abil­ity of farm­ers to adapt, to­gether with gen­er­ally lower hay and grain costs and bet­ter weather con­di­tions, has helped many to gen­er­ate a more pos­i­tive fi­nan­cial re­sult than they may have an­tic­i­pated,” he said.

In Tas­ma­nia good sea­sonal con­di­tions and im­proved priprice ces have seen milk pro­duc­tion dur­ing 2016-2017 fall less than in other parts of the coun­try.

The re­port says that with good sea­sonal con­di­tions this year and bet­ter re­turns, over­all pro­duc­tion should im­prove.

In the do­mes­tic mar­ket but­ter sales have been a stand­out.

Dur­ing 2016-2017 but­ter sales vol­umes in­creased by 1.9 per cent while ma­jor price rises saw the value of sales jump by 12.2 per cent to $242 mil­lion.

The value of cheese sales also grew by 3 per cent.

Re­sults from the Dairy Farm Mon­i­tor­ing Project show sim­i­lar, or slightly im­proved, earn­ings be­fore in­ter­est and tax com­pared to the pre­vi­ous 12 months.

Mr Drop­pert noted that while EBIT re­sults were bet­ter than the pre­vi­ous sea­son, many farm busi­nesses would be us­ing any sur­plus cash for debt re­duc­tion or ex­penses in­curred from last sea­son.

De­spite the low­est milk re­ceived in the his­tory of the project, 89 per cent of farm­ers recorded a pos­i­tive re­turn on as­sets as good con­di­tions re­duced feed costs, help­ing off­set low prices.

The re­port found 89 per cent of sur­veyed farm­ers were op­ti­mistic for the 2017-2018 sea­son, with the ma­jor­ity pre­dict­ing an im­prove­ment in farm busi­ness re­turns.

The re­port high­lights an up­ward swing in na­tional pro­duc­tion but notes sea­sonal and price chal­lenges fac­ing the do­mes­tic-fo­cused Western Aus­tralia, Queens­land and NSW.

Dairy Aus­tralia se­nior an­a­lyst John Drop­pert said that while the over­all mar­ket did ap­pear to be im­prov­ing, chal­lenges re­mained for sup­pli­ers in the do­mes­tic mar­ket.

“Many farm­ers in do­mes­tic­fo­cused re­gions have seen milk prices ease over the past sea­son,” he said.

“Cou­pled with the ex­treme weather events in parts of Western Aus­tralia, Queens­land and NSW, this has squeezed mar­gins and im­pacted farm prof­itabil­ity.”

In the broader con­text dairy mar­ket set­tings re­main sup- portive of a grad­ual re­cov­ery. In­ter­na­tional com­mod­ity prices are re­flect­ing a rel­a­tively bal­anced sup­ply and de­mand sit­u­a­tion, chang­ing lit­tle over the past few months.

But­ter prices are near record lev­els, while skim milk pow­der val­ues re­main sup­pressed by large vol­umes held in Euro­pean stor­age.

Prices for most other prod­ucts re­main some­where closer to av­er­age.

Based on a com­bi­na­tion of con­tained in­put costs and the mod­est im­prove­ments seen in far­m­gate milk prices, Mr Drop­pert ex­pected growth in milk vol­umes in the south­ern dairy­ing re­gions.

“Dairy Aus­tralia’s fore­cast for 2017-2018 milk pro­duc­tion re­mains a growth range of between 2 and 3 per cent on the 2016-2017 to­tal of 9.02 bil­lion litres,” Mr Drop­pert said.

“This im­plies a fore­cast to­tal of around 9.2 bil­lion litres for 2017-2018.”

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