Dairy prices are rebounding as global coronavirus restrictions ease and food service sales resume.
However, Rabobank’s Q2 2020 Global Dairy Quarterly report warns it may still be too soon to assess the true strength of the global dairy market.
The report says the biggest falls in Australian milk production in recent seasons have come from the Murray-Darling Basin production region.
For irrigation dairy farmers in the southern Murray-Darling Basin, flows into the major storages since the start of April provided an increase in water availability, which led to a better foundation for irrigation dairy regions heading into the new season.
The latest Bureau of Meteorology climate outlook for June to August favoured wetter-than-average conditions across all major dairy production regions.
Improved seasonal conditions have slowed culling rates, as Australian dairy farmers look to rebuild stocks.
Purchased feed markets have continued to trend lower since the start of the year, providing margin support for dairy farm businesses.
In Australia, milk is being prioritised for cheese and whey on the back of reduced milk availability.
The reduced availability of milk has led to softer exports, with total exports down six per cent on a volume basis compared to the previous year.
Rabobank senior dairy analyst Michael Harvey said Australia’s milk production recovery in the southern export pool was gathering pace, up 6.7 per cent in April year-on-year.
“Favourable seasonal conditions will support milk production growth into the 2020-21 season, bringing national production back above nine billion litres and a return to growth in the exportable surplus from Q2 2020 — for the first time since 2018,” Mr Harvey said.
Rabobank is forecasting milk production to finish at 8.7 billion litres, representing a decline of just 0.7 per cent, expanding by 3.4 per cent in the 2020-21 season.