Positive outlook for West Australian dairy farmers as industry innovation day draws large crowd

WA’s biggest dairy conference drew a packed crowd to Brunswick Junction on Friday, where farmers and industry players were told they were in a unique position to weather negative influences affecting global prices. Speaking at the annual Dairy Innovation Day, Rabobank senior dairy analyst Michael Harvey said global consumer trends did not tend to have a major impact on the WA white milk market. “We are seeing an income squeeze all around the world which is having an impact on the global consumer market,” he explained. But with 82 per cent of milk produced in WA going directly into the domestic white milk market, WA dairy farmers were more immune to “import risk”. Organised by Western Dairy, this year’s Dairy Innovation Day was held at Melville Park, an historic former dairy in the heart of WA’s South West. Mr Harvey, who was among several guest speakers, said the latest report from multinational food and drink processing conglomerate Nestle indicated consumers were spending less on dairy. However, he noted population was a more influential factor than global trends in WA, adding population growth in the State was “positive”. Supermarket fresh milk discounting was also not likely to impact the WA dairy industry any time soon. “On a cost front there is also good news: fertiliser prices are trending down globally,” Mr Harvey said. “Currently the cost of dry feed is up in WA; however, the outlook for global fertiliser prices is favourable. Overall, WA dairy producers are in a positive position.” Mr Harvey said the export heifer market was not likely to improve any time soon, with the Chinese no longer buying stock like they had in the past, but noted the market could bounce back in the long term. Local milk production in China was one of the factors influencing predictions on the future of dairy exports from Australia. China has seen an increase in its local milk production following investment over many years in expanding its own dairy industry. Rabobank’s latest quarterly report found earlier expectations of gradual global milk price increases throughout the year had been tempered by a combination of weaker global demand and increased domestic milk production in China. Higher milk production in China, in combination with subdued Chinese dairy consumption on the back of a weak job market and lower consumer confidence, was limiting Chinese demand for dairy imports. “We have now revised our forecast for milk output in China for 2024, up from two per cent growth to 3.2 per cent, reflecting higher-than-anticipated output due to the lagging effect from the last round of dairy expansions during 2019-2022,” Mr Harvey said. Rabobank expects China’s net dairy imports to be 8 per cent lower in 2024 compared with 2023, marking a third consecutive decline in net import volumes. “The combination of stronger local milk production and weaker consumer demand in China will diminish the domestic deficit to around 11 million metric tonnes LME (liquid milk equivalent), while SMP (skim milk powder) import volumes are likely to decline by 20 to 30 per cent compared with 2023 levels,” Mr Harvey said. The report stated the initial surge in global dairy prices seen in late 2023 and early 2024 was largely due to a period of importers’ restocking at lower prices rather than a robust uptick in consumer demand. These factors suggested global dairy prices may encounter further obstacles on the path to recovery. “Milk production from the main global export regions will expand only modestly in Q3 before gaining some momentum towards the end of the year,” Mr Harvey said. “Low profitability over the past 12 months has led to a decrease in dairy herds in key regions like the US and South America, while weather-related issues have also affected milk output in recent weeks, with diminished rains in New Zealand and excess rains in Europe.”