Profitable year for dairy expected despite challenges
Dairy farmers in most regions are well-placed for another profitable year, according to the March 2022 edition of Dairy Australia's Situation and Outlook Report, released on 9 March 2022.
Dairy Australia’s Senior Industry Analyst, Sofia Omstedt, says: “Although costs are going up across the board, Australia’s dairy industry remains profitable, with strong international demand and weak supply continuing to boost global commodity values.”
The rise in commodity prices has been driven in part by a shrinking global milk pool, with many key exporting dairy regions experiencing a drop in production. Meanwhile, buyers in key international markets have moved to build up stocks to mitigate supply chain disruptions, exacerbated by shipping congestion, container shortages and political tensions in Europe.
In Australia, the anticipated consumption rebound has lived up to expectations, with foodservice sector sales up by 24% over the holiday period, and retail sales on par with pre-pandemic levels.
The Australian dairy industry is not immune to broad inflationary pressures, with cost pressures and margin impacts expected to be felt across the entire supply chain.
Despite this, however, supportive market fundamentals continue to provide cause for optimism, with growing demand and weaker supply underpinning elevated commodity values.
“With the national milk pool expected to shrink by between 1% and 3% this season, strong competition for milk is likely to continue well into next season,” Ms Omstedt says.
The Situation and Outlook report (March 2022 edition) can now be found here.