Global Dairy Trade: Australian farmers say farmgate out of alignment

Dairy farmers are looking to Sydney over Shanghai for price indicators, as export markets take a back seat to domestic.

Exposure to international dairy commodity prices is at its weakest point in a generation, industry leaders say.

A succession of underwhelming trading sessions on the Global Dairy Trade index did little to dampen the start of the Australian dairy season over the weekend, with a farmgate opening average of $9.20-$9.50 a kilogram milk solids.

A key GDT metric — the whole milk powder index peaked in March 2022 at $US4757 ($A7026) per tonne.

Trade has flatlined in recent months due to a weakening Chinese economy, with the whole milk powder figure resting at $US3172 ($A4753) per tonne.

But the push above $9.00/kg MS by smaller processors such as Bulla means the once heavily export-reliant Victorian dairy sector has been somewhat insulated from the vagaries of the international marketplace.

United Dairyfarmers of Victoria vice-president Craig Dwyer said Australia’s dairy sector was far more focused on domestic consumption in 2023 compared to the export decades of the 1990s and early 2000s.

“When you look back to the co-operative days, about 50 per cent of Australia’s dairy was bound for export. These days, it’s around a third, if not less than a third,” the southwest Victorian farmer said.

“Australia has a shrinking milk pool, that’s well known, so supply is tight, and the processors are increasingly aware of that. Domestic demand remains strong, and you’re seeing that reflected in the pricing.”

NSW Farmers dairy committee vice chairman Malcolm Holm. Picture: Dale Webster

NSW Farmers dairy committee vice chairman Malcolm Holm said international pricing ups and downs were somewhat of a sideshow this season.

“There was a lot of talk in March, April, even May about the weaker international market,” the Finley region farmer said.

“But you look at the Sydney, Brisbane, Canberra milk markets — supply is tight, and demand is strong. International prices clearly aren’t as important in the current economic climate.”

Released this week, Rural Bank’s agriculture mid-year outlook confirmed weak import demand has global dairy prices below average.

“But flat to lower domestic production means local prices remain near record highs,” the report authors concluded.