Milk flows as production on rise

HIGHER milk prices and more favourable weather conditions are starting to flow into a recovery in Australian production and exports, a new report says.

Agribusiness banking specialist Rabobank forecasts the national milk production to increase by 2.7 per cent in the 2017-18 season, in its latest dairy quarterly report.

Australian farmgate milk prices have played catch-up, compared to global markets, and milk solids should finish at $5.80 to $6 a kilogram in southern Australia.

Rabobank senior dairy analyst Michael Harvey said a good reserve of high-quality fodder, good soil moisture and higher water entitlement would see a solid finish to the season.

Mr Harvey said Australia’s exportable surplus has contracted significantly over the past 18 months, and “it is only now that the benefit of improving milk supply will start to drive a recovery in exportable surpluses”.

“In export markets, while demand growth is starting to moderate following a period of robust growth, dairy demand in emerging economies appears to be strong, with robust import purchasing in key deficit regions, including SouthEast Asia,” he said.

Globally, milk production in New Zealand and Europe has expanded and led to an oversupply of milk temporarily hitting the market. Mr Harvey said despite the global exportable surpluses, “we will not see the global market crashing”.