Record minimum milk price offers are already being made to Australian dairy farmers according to Rabobank research – but there’s a catch.
Although global market fundamentals remain strong, dairy farmer’s margins are under pressure due to rising input costs according to the bank.
In its Australian Dairy 2022/23 Seasonal Outlook, Rabobank has forecasted an indicative milk price of $8.40/kgMS for southern Australia.
And despite Australia’s national dairy cow herd falling for the fifth consecutive year, Rabobank predicts a 0.9-per-cent increase in milk volume, returning production to 8.64 billion litres in 2022/23.
On a global scale, the big seven dairy exporters (the EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay) have recorded lower milk production this year due to supply chain disruptions and weather-related impacts.
Rabobank senior dairy analyst Michael Harvey said the global dairy commodity market is doing the ‘heavy lifting’ in propelling milk prices to record levels.
“Commodity prices for Oceania-origin butter and cheese are trading at record levels and the milk powder complex is nearing record highs,” he said.
The report has suggested that dairy farm businesses can expect local guaranteed milk pricing despite a complicated operating environment.
“There are record minimum milk price offers already in the market across southern Australia. This will provide a strong cash flow position for farm businesses and, given the level of price security, could provide a good risk management platform for inputs to ensure an adequate locked-in margin,” said Harvey.