Dairy producers feel the pressure from costs

OVER the past few months, global dairy prices fell marginally but still track at elevated levels, due to tight global supply.

A decision by the world's largest dairy supplier, Fonterra, to reduce its offering of products to be sold on the Global Dairy Trade (GDT) will further tighten supply in the short term, which should provide support to prices.

Production-wise, Australia and New Zealand had a strong start to the new dairy season, although it is unlikely supply from the two nations will be able to keep pace with global demand in the immediate future.

While good rain should support production across major dairy- producing regions in southern Australia, hot and dry conditions in northern regions, including south-east Queensland, are affecting costs and production.

Extra irrigation has been required to produce adequate fodder crops and associated costs have taken the gloss off higher prices for some producers.

In the northern hemisphere, production has passed its seasonal peak but the United States and European Union remain relatively strong compared to the corresponding time in 2012.

In saying this, these regions will be likely to keep their dairy products for domestic consumption rather than export.

Topics:  dairy markets nab agribusiness

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