The agribusiness banking specialist says while the upcoming season’s milk price will likely be lower than the “lofty highs” currently being offered across parts of the southern export region – reflecting the current downturn in the global commodity price cycle – there is a “firm landing zone” expected for new season Australian milk prices.
This is due to stronger domestic dairy market returns, a weak Australian dollar and “aggressive recruitment and retention strategies” by dairy processors in a competitive market for milk supply.
And these are providing a buffering effect to the full extent of global pressures, according to report author, Rabobank senior dairy analyst Michael Harvey.
With the June 1 deadline approaching for minimum milk price offers from Australian dairy companies, the bank is forecasting minimum offers for new season milk in southern Australia to be between AUD 8.50/kgMS and AUD 9.00/kgMS.
“Another season of historically-elevated milk prices will support farmgate margins.”
Cost relief The report – titled ‘Looking for a Firm Landing Zone’ – says there is “welcome relief” for dairy farmers from a recent record-high cost base, with lower prices for purchased feed and fertiliser flowing through balance sheets.
“Even if some dairy farmers see an easing in minimum price offers, this should come with cost relief,” said Harvey.
Global feed benchmark prices are down compared with last year, although still above medium-term averages, while local wheat prices are tracking close to global trends, he added.
“Locally, grain supplies are high, after several bumper winter crops, with the prospect of another decent winter crop this year meaning feed supply will be adequate for buyers and will help to dampen feed supply risks,” said Harvey.
Australian dairy farmers will already be seeing the benefits of a significant correction in global fertiliser prices and, therefore, a boost in affordability, Harvey added.
