The Oceania dairy sector has weathered the global pandemic well. When reviewing the events over the past year, there has been minimal disruption to local dairy supply chains. Farmers have enjoyed good profitability as milk production has expanded, and dairy demand (local and offshore) has been relatively resilient as global economies improve.
The Oceania 2020/21 production season is winding down, with the peak milk output long past and winter approaching. The New Zealand and Australia seasons conclude on May 31 and June 30, respectively. Dairy farmers’ margins are positive as improving milk prices and cull cow prices throughout the season and favourable climate conditions support pasture growth for the upcoming season.
Oceania dairy farmers are now turning their attention to the new season in terms of budgeting and investment plans. As always, farmers are eagerly anticipating the initial milk price signals for the new season. The current outlook remains quite positive for both countries, with farmer confidence elevated.
Global commodity markets are a key driver of farmgate milk prices in both countries. Based on Rabobank’s latest global commodity price outlooks, the settings are in place for another season of healthy profitability. Rabobank anticipates a NZD7.40/kgMS farmgate milk price for the 2021/22 season (vs NZD7.80/kgMS in 2020/21), marking the fourth consecutive season with prices above NZD7.00/kgMS. Rabobank forecasts a full-year milk price of AUD6.65/kgMS for 2021/22 in the southern export sector (vs. AUD6.60.kgMS in 2020/21).
Sustained profitability will support production growth in 2021/22, following positive gains in the previous season. Rabobank expects New Zealand and Australian milk collections for the 2020/21 season to be around 1% higher than the prior period. Favourable climate conditions and improving milk prices have underpinned supply growth. Milk prices have moved higher since the start of the season in both countries on the back of firmer commodity prices. As is often the case, given its heavy export commodity focus, New Zealand dairy farmers have fared better from the commodity market rally, resulting in big lifts in farmgate prices. Still, New Zealand dairy producers face several changes regarding freshwater regulations this year. These include restrictions around winter grazing, land-use intensification, and applications of synthetic nitrogen fertiliser. Despite favourable milk prices, increasing environmental regulations are likely to cap New Zealand cow numbers, with production gains primarily due to genetic advancement and favourable climate conditions. As a result, Rabobank anticipates a 1% gain in New Zealand milk production for the 2021/22 season.
The timeliness and strength of autumn rainfall is an essential feature for the Australian production outlook. Some key dairy regions had received good rains by late March, causing flooding in a few smaller dairy regions. Rabobank expects Australian 2021/22 milk production to expand by 1.3%, pushing annual milk production to 8.8bn litres. The hard constraint for Australia’s milk production remains a low national herd and the cautious response from farmers to rebuild herds after several years of drought conditions from 2010 to 2019.
