Milk production set to increase

Milk production is set to increase for the first time in three years, according to Dairy Australia’s latest Situation and Outlook report.

The Dairy Australia report said favourable weather, lower input costs and relatively firm farmgate milk prices were combining to create some of the best dairy farming conditions of recent years.

Gippsland, Tasmania and South Australia are expected to lead the charge of increased milk production.

In July milk production grew 2.9 per cent compared to last year and preliminary figures suggest the growth continued in August.

The report highlighted significant changes in consumer purchasing habits resulting from COVID-19.

While food service sales have declined due to reduced hospitality sector activity and travel, retail dairy sales have been fuelled by increased levels of home cooking and baking.

The report said cooking and baking at home had “experienced a renaissance” which helped drive a continued increase in supermarket sales.

As consumers ate more meals at home, dairy products used in cooking were the ones that have grown the fastest since the start of the pandemic.

Supermarket sales of butter surged 18.2 per cent, cheese increased 6.4 per cent and plain Greek yoghurt was up seven per cent.

“Two very different stories are emerging for the current season,” said Dairy Australia senior industry analyst Sofia Omstedt.

“One tells the tale of consistently improving conditions at the farmgate and a positive flowon impact on milk production. The other reflects depressed global economic growth, disrupted dairy demand and significant shifts in consumer purchasing habits from COVD-19.

“From a farmgate perspective several things are going well, as input costs ease, confidence rebounds, and milk production continues to grow.

“Whilst the story is far from finished, this year could finally provide the industry a much needed breathing window and farmers the time to build up equity again,” she said.

Global supply of dairy was reported to be mounting.

In the northern hemisphere, supply growth improved as incentives curbing milk production were phased out.

Milk supply in the US and New Zealand exceeded expectations, with global production growth likely to weigh on commodity pricing unless resurgent demand can soak up additional milk, the report said.