Life on the land in Australia

Dairy woes hit Australian farmer confidence with a Dry autumn

cow -on-lead image www.ozrural.com.au

In its monthly outlook report, Rabobank said dairy farmers would respond to the price cuts by reducing herd sizes, which would reduce milk production.

Farmer confidence has eased due to the dry start to autumn, coupled with the significant challenge to dairy farmers in parts of the country’s south east after steep price cuts.

A regular survey by Rabobank found farmers less optimistic on the outlook for the agricultural economy – 28 per cent down from 34 per cent earlier in the year – and a rise to 19 per cent from 11 per cent in those expecting conditions to worsen.

The subdued outlook was a result of the dry and unseasonably warm conditions throughout much of summer and autumn, the survey found, although recent rains had alleviated some of those concerns in south-eastern Australia.

“After very little rain to speak of since January, farmers were grappling with dry conditions until the rains fell in early May,” Rabobank national manager for Country Banking Australia Todd Charteris said. “This has spurred winter crop plantings across the south-east of the country, with farmers now able to fulfil their planting intentions.”

Rainfall had been patchier in parts of South Australia and also Queensland, and had come too late in some areas to promote significant pasture growth. But it was the significant challenge to the dairy industry that had begun to weigh on sentiment.

“At the time of the survey, sentiment was already low due to the global market downturn and dry seasonal conditions in many dairying areas,” Mr Charteris said. “But these concerns have been eclipsed by the recent cut in milk prices.”

Coming so late in the season, the retrospective price cuts imposed on some dairy farmers meant they were not able to cut costs quickly in response. Many had bought feed earlier in the season “which they may not have done if they knew the farm-gate price would be retrospectively cut to $5 per kilogram of milk solids”, he said.

“While the medium-term forecast for the sector remains more positive, with global prices expected to improve, it will take a while to flow back to the farm gate, with producers bracing for low milk prices next season,” Mr Charteris said.

In its monthly outlook report, Rabobank said dairy farmers would respond to the price cuts by reducing herd sizes, which would reduce milk production.

With producers expecting no improvement in the low prices, the spread in the milk price offered by processors at the start of the season could be wider than normal, the bank said. Sentiment might also improve if the signs of a slowdown in milk supply growth in the European Union come to fruition, it said.

“The focus has been on dairy in the south east but, for the rest of the agriculture industry, it’s been positive,” the bank’s head of research Tim Hunt said. The recent autumn rain, the interest rate cut by the Reserve Bank, which also helped push the dollar down to US72¢ from US76¢ a month ago, and the improvement in most commodity prices had helped to lift sentiment, he said.

Autumn rains were expected to support full winter crop planting in Victoria and NSW, Mr Charteris said.


Henry Sapiecha

June 1st, 2016

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