Australian milk pool set to shrink in 2022 due to floods

For southeast Australia, it has been a flooded hell of a year. And it’s set to take a bite into national milk production.

Australia’s milk pool is set to evaporate this calendar year, but the scale of the condensation is yet to be revealed.

Dairy Australia’s final situation and outlook report will be released today, outlining how the industry enjoyed a calendar year of bumper prices and stronger farm finances.

But number crunchers say milk production figures will inevitably recede in most markets due to floods or the broader issue of inflation, which is set to bite in the new year.

Dairy Australia insights and analysis manager John Droppert said Australia’s milk production outlook for the 2022-23 financial year would almost certainly be revised downwards.

He said the full impact on forward milk volumes was difficult from an early summer vantage point.

“Obviously, there’s been floods across northern Victoria and southern NSW,” Mr Droppert said. “The Northern Rivers region of NSW has worked all year to rebuild from the floods that hit that part of the world in March. Parts of southwest Victoria, Gippsland and other dairy regions have been hit to a lesser extent, depending on farm location.

“All of that has a cumulative effect on the national milk pool. It’s hard to gauge at the moment but it’s almost certainly going to be revised downwards.

“That’s not a trend isolated to Australia. New Zealand has a contracting milk pool due to seasonal conditions, concerns over government regulation and inflation.”

Floods have eroded Australia’s milk productivity. Picture: Zoe Phillips

The report noted that flooding and the inevitable mop-up this summer would hit grain and silage supplies heading into the new year.

“There is potential for opportunistic access to downgraded product,” Mr Droppert said.

“But when it comes to floods, the overall effect will push feed prices higher and especially for higher quality fodder because it’ll be harder to come by.”

Also contained in today’s outlook report is the latest results from Dairy Farm Monitor Project, which found profitability remained above long-term averages in the 2021-22 financial year.

Mr Droppert said while livestock trading conditions continue to be strong, rises in key input costs could outweigh the increase in gross farm income.

“Input costs are a big concern heading into 2023. It’s been an unpredictable year for fertiliser prices. We’ve seen enormous pressure on farmers when it comes to fert pricing, particularly in the months immediately after Russia invaded Ukraine,” he said.