Dairy Australia: strong prices, flat milk pool in outlook for 2022-23

More than four in five dairy farmers are confident about the coming season, a new survey shows, but milk supply will remain flat.

Tightening worldwide supply for milk is a driving factor behind record prices paid at the farmgate this week, the latest snapshot of the industry confirms.

Captains of industry and farm leaders gathered in Melbourne for Dairy Australia’s situation and outlook report breakfast today, with farmgate figures at the top of the agenda.

This week, Bega raised the stakes in the battle for milk supply, lifting its 2022-23 season offering to $8.90/kg of milk solids for northern Victorian and Riverina farmers and $8.80/kg of milk solids for southern Victoria.

The price trumps major rivals Fonterra sitting on $8.25/kg of milk solids and Canadian giant Saputo on $8.40.

Dairy Australia analysis manager John Droppert said farmers would continue to balance labour and other input costs against record prices at the farmgate into the coming season.

He forecast that the national milk pool would sit at about 8.5-8.6 billion litres in 2021-22 with next financial year similarly flat.

“We are going to see that cost pressure continue, we could probably say very similar things about conflict in eastern Europe and energy prices, I don’t see any of these issues resolving overnight,” Mr Droppert said.

Dairy Australia's John Droppert with ADF president Rick Gladigau, Gippsland farmer Lauren Finger, Fonterra Australia chief executive Rene Dedoncker and Nielsen HomeScan's Faith Lamont.

“Labour shortages are not just a problem for dairy. As we know, it’s across agriculture and in many sectors they’re trying to secure staff.”

More than 80 per cent of respondents to the annual National Dairy Farmer Survey, contained in the report, were confident about the coming season.

But Mr Droppert said that confidence had not translated into expansion, rather, farmers were consolidating their business by performing upgrade work around their properties.

“While we are not seeing growth, the flip side of that is we are seeing farm systems are being increasingly robust, there are better tracks, better fences and updated machinery,” he said.

A panel of industry experts — Nielsen Homescan’s Faith Lamont, Gippsland dairy farmer Lauren Finger, Australian Dairy Farmers president Rick Gladigau and Fonterra chief executive Rene Dedoncker joined Mr Droppert in a panel discussion.

Mr Dedoncker noted the end of lockdowns in Sydney and Melbourne in the past six month had translated into heightened demand for dairy in restaurants and cafes.

“Last month was one of the strongest months for dairy into food service that we’ve seen in some time,” the Fonterra boss said.

Ms Lamont said inflation had yet to hit dairy sales in supermarkets with prices for foodstuffs up across the board.

“People make at least five of six decisions at least when they enter a supermarket. When it comes to staple foods such as dairy, they will continue to buy the basics but consumer choices on more discretionary items do change with rising inflation,” she said.