10 May 2007
Speaking at the recent Agfest field days in Launceston, Rabobank senior analyst Hayley Moynihan discussed the Australasian implications of a growing global thirst for milk.
Ms Moynihan, who is based in New Zealand, told Agfest attendees that global demand for dairy had been solid due to the increased wealth of developing counties and changes in the traditional diet of urban consumers.
However, on the supply side Ms Moynihan said that slowing milk production globally meant there were increasing challenges to meeting this growing demand.
As a result of the shortages of product on global markets, prices continue to be pushed up as the impacts of slowing primary production growth flow through, Ms Moynihan said.
"US milk production continued to slow through the early months of 2007 as the milk/feed cost ratio fell. Rising maize costs have also taken a toll in Argentina early in the year, while the drought continues to push Australian milk supply well below previous year levels," she said.
And with production now well into seasonal decline in the Southern Hemisphere, Ms Moynihan says that any significant increase in tradable supply over the next few months would have to come from the Northern Hemisphere.
"With stockpiles all but empty in the EU and USA, and pedestrian growth at best currently evident in milk production in these regions, buyers will approach this period anxiously," Ms Moynihan said.
"The Australian industry remains well placed to offer strong farm gate signals to farmers for the 2007/08 season," Ms Moynihan said. "Firming commodity prices and encouraging rains in some growing regions through April have improved sentiment at farm gate level.
The Rabobank Rural Confidence survey showed a strong recovery in confidence amongst dairy farmers in the March quarter, with investment intentions also returning to positive territory," she said.
However, Ms Moynihan warned that the Australian dairy industry faced a long haul to recover to pre drought levels, and is unlikely to do so in the short term. Milk production was10 per cent below previous year levels in March, with the gap expected to have widened further in succeeding months.
In New Zealand, Ms Moynihan said that the dairy industry was struggling to maintain growth, with the strong prices overshadowed by a persistently strong New Zealand dollar.
"The dairy industry in New Zealand is receiving competition from lamb and is also facing challenges in relation to urban pressures and the impacts of low labour availability, environmental constraints, a high capital cost of entry and almost no domestic market.
Farm input costs are also continuing to move upwards," Ms Moynihan said, adding that capital growth continues to be the key driver for total dairy returns in New Zealand.
As a result of these factors, many New Zealand dairy farmers are starting to focus off-shore Ms Moynihan told the audience, with their growing presence in Tasmania a trend she predicts will continue.
Rabobank employs a worldwide team of Food and Agribusiness Research (FAR) analysts specifically dedicated to producing comprehensive, world-class research and analysis for the bank and its clients.
The FAR division includes a locally-based team of analysts focussing on agricultural commodities and the agribusiness industry in Australia and New Zealand.
Rabobank Australia is a part of the international Rabobank Group, the world's leading specialist in food and agribusiness banking. Rabobank has more than 100 years' experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank has a AAA credit rating and is ranked one of the world's safest banks by Global Finance magazine. The bank operates in 43 countries, servicing the needs of more than nine million clients worldwide through a network of more than 1500 offices and branches. Rabobank Australia is one of Australia's leading rural lenders and a significant provider of business and corporate banking and financial services to the Australian food and agribusiness sector. The bank has 46 branch locations throughout Australia.
Contact
For further information please contact Denise Shaw, Public Relations Manager (Tel: +61 2 8233 8744) or email on sydney.mediarelations@rabobank.com.