TASMANIAN milk production was down in October as the impact of record wet conditions and flooding took their toll.
The latest figures from Dairy Australia show year-to-date production in the state is down by 6.6 per cent compared to last year and October milk production in Tasmania was down 5.4 per cent.
However, strong market conditions and stable milk prices could help dairy farmers deal with production challenges according to a new report.
Dairy Australia’s December 2022 Situation and Outlook Report says positive farm finances and a resilient domestic market for milk and yoghurt could help mitigate the effects of inflation and widespread spring flooding.
Profitability has remained above long-term averages in 2021-2022, according to the Dairy Farm Monitor Project.
This season, milk prices are averaging higher and livestock trading conditions continue to be strong.
However, rises in key input costs could outweigh the increase in gross farm income.
Despite inflationary pressure, Australian consumers are still buying dairy.
The report says sales of fresh milk is up by 0.3 per cent and yoghurt sales have increased by 0.9 per cent for the year to October.
Rather than forego dairy, consumers have begun to adjust their purchase decisions – buying products on special and trading down to private label products.
However, dairy remains a staple, with 98 per cent of Australian households buying milk.
Dairy Australia’s Industry Insights and Analysis Manager John Droppert said the report found staffing is still an issue and identified an increased reliance on farm owners and family members as unpaid labour.
“We have also seen a greater investment in labour-saving technologies such as robotic milking systems and cow monitoring collars.” he said.
Production across the eastern states including Tasmania has been impacted by widespread spring flooding and wet conditions.
The season to October saw milk output contract by 6.5 per cent, with the wet conditions and flooding expected to weigh on this further.
New South Wales and Queensland have tracked over 10 per cent below last season, reflecting the damage done in the February-March floods and subsequent extended wet conditions.
Northern Victoria and Tasmania were hardest hit in October, and the impact will likely persist for the balance of the season, having occurred at the critical point of the spring peak.
The full impact on forward milk volumes is difficult to assess, however, the report says Australia’s milk production outlook for 2022-2023 will almost certainly be revised downwards.
Rising input costs are also having an impact. Fertiliser prices continue to sit well above long-term averages.
High prices are a major contributor to reduced fertiliser use on-farm this season.
Global indicative values of diammonium phosphate, urea and muriate of potash are currently 103 per cent, 160 per cent and 177 per cent higher than this time two years ago.
In addition, an inability to access paddocks at critical times has compounded the productive impact for many farmers.
The report says this may lead to constraints in homegrown feed availability in the coming months.
There have also been significant impacts on grain and silage supplies.
“While there is potential for opportunistic access to downgraded product, the overall effect will likely push feed prices higher – especially for high-quality product,” said Mr Droppert.
Overseas the report says milk intakes are growing in the northern hemisphere while the New Zealand milk pool is constrained with similar feed costs and labour challenges to Australia.
Demand in China is likely to remain subdued suggesting that global dairy commodity prices are likely to be under some pressure in the New Year.