Page 32 - Food & Drink Business Jan-Feb 2020

DAIRY BUSINESS
In the firing line: the state of dairy
How the 2019-20 bushfire season will impact the dairy industry is yet to be fully understood. Doris Prodanovic speaks to Rabobank and Niche Agribusiness dairy industry analysts Michael Harvey and Andrew Weinert.
increase and availability will reduce,” Weinert told Food
& Drink Business.
“Milk production from heat stressed cows will reduce, and severely stressed cows won’t recover in their current lactation. I don’t think we will run out of drinking milk – yes, it will be short, but not a problem.
“Australia’s lowest month in 2019 was April when 572 million litres was produced. That is 19 million litres per day, or more than 2.5 times daily drinking milk demand.
“On the other hand, cheese and butter imports will increase as less will be made in Australia,” Weinert says.
CHANGING OF THE SEASONS
Rabobank’s Dairy Quarterly Q4 2019 report states the Australian dairy industry started its new season on
1 July 2019, with 1.44 million head of milking cows; seven per cent (107,000) less than the previous season.
Increased input costs and “unfavourable” seasonal conditions have also damped profitability expectations heading into the new year.
December’s Rural Confidence Survey revealed the confidence of dairy farmers had experienced a “sizeable fall”, says Harvey.
“The only bright spot is that farmgate milk prices across the southern export region are at record levels,” he says.
“It is worth noting that there were some production regions where seasonal conditions fairly reasonably well and this was translating into a return to growth with brighter prospects on the horizon for 2020.”
Harvey says the Australian dairy supply chain was already experiencing pressure due to the shrinking milk pool but “should not materially impact the broader industry in terms of any major product shortages for consumers”.
The profit pool also remains under pressure, with recent announcements from Bega
THE impact of the catastrophic 2019-20 bushfire season on agribusiness and associated industries, including the Australian dairy sector, is yet to be fully realised.
PRODUCTION DROP
In Australia, the ongoing drought has negatively impacted feed costs for livestock and pasture growth.
In the four months of the 2019-20 season, milk production fell by 5.5 per cent – a loss of 190 million litres.
Rabobank senior analyst for food and agribusiness Michael Harvey told Food & Drink Business the company had recently revised down its milk production forecast for Australia, with its latest expectation declining by 5.8 per cent, to 8.3
billion litres. It represents another loss of 500 million litres of milk from the system.
“The majority of the falls will come from the northern Victoria and southern New South Wales irrigation districts, with further falls in the northern drinking milk states,” Harvey says.
“However, there is now downside risk to this forecast given the impact of the bushfires. It is too early to put a number on the volume of milk lost. We know there are a number of production regions affected including East Gippsland, Northeast Victoria and central New South Wales... with farm operators having lost cattle, farm infrastructure and pasture and feed supply.
“There has also been
logistical disruption with milking unable to take place due to loss of power and milk not collected by tankers due to road closure. For farms affected, it will take time and investment to recover.”
Niche Agribusiness consultant and dairy industry analyst Andrew Weinert says the result of the bushfires will reduce dairy production and push up costs.
But neither the price of imported dairy products (which drives the farmgate price) nor the farmgate price will change, driving many out of the industry.
This means the longevity of the Australian industry is compromised, he says.
“Apart from the human and animal tragedies, which are huge, the price of supplementary feed will
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