Rabobank report showing challenges ahead for dairy farmers

Dairy farmers are in for another challenging year, as rising costs overpower the rising price of milk.

• Farmers cautious as Coles, Aldi raise milk prices

Dairy farmers are in for another challenging year, despite rising milk prices, with Rabobank forecasting national milk production to be down 8 per cent this season.

The bank’s first quarter dairy report shows that farmgate milk prices are unable to mitigate expensive input costs and that tight margins are leading to increased culling rates.

Rabobank senior analyst Michael Harvey said feed supplies and costs were an issue.

“The year-to-date hasn’t been kind to most regions, with most farmers battling high costs,” he said.

“The green shoot is the global market is in better shape.

“We can see more upside to come and farmgate milk prices improving.”

A positive for the sector is strong import activity by China so far this year, and signals that import growth will accelerate in the second half of 2019.

Weather challenges in Argentina and New Zealand are adding to global supply pressure, which supports further upside for global prices.

But Mr Harvey said a lot was hinging on how much rain fell across Australia in the upcoming season.

“If we get a good break and a good season, the outlook could shape up much better, but we’re definitely not there yet,” he said.

Mr Harvey said there was particular pressure for irrigators, with prices for water likely to rise this year.