FARMGATE milk prices are on track to improve by between 5 per cent and 10pc on last year, but confidence among South Australian dairyfarmers is the lowest in Australia, according to preliminary results from the National Dairy Farmer Survey.
These were two of the key messages at an industry outlook breakfast for service providers at Victor Harbor recently.
Growth across major markets for Australian exports in China, south-east Asia and the Middle East remains strong, while production in major exporting regions has scaled back and corrected the over-supply of last year, both auguring well for next season's opening farmgate milk price.
Speaking at the breakfast, Dairy Australia strategy and knowledge manager Joanne Bills said these were the reasons there had been strong results in the GlobalDairyTrade auction results since Christmas.
"On top of the United States drought, we've had more bad news about drought conditions in New Zealand, slowing supply and at the same time we've had Chinese buyers coming into the market very strongly with a new tariff year," she said.
"That's why we've seen commodity prices rise so strongly in the last couple of months.
"Most analysts would state $6000 a tonne for wholemilk powder is really not sustainable, but the indication from the GDT is that they will trade at a fair bit above where we were last year, given those wider supply constraints."
At the same time, the $A stubbornly remained at between $US1 and $1.05.
Ms Bills said although commodity prices had improved in US dollars, in Australian dollar terms returns were lower because of the strength of the currency.
"If you look back at 2008 when milk prices were sitting at about 50 cents a litre, the $A was sitting at about US85c," she said.
"It's not quite as good news in terms of what will be returned to us as exporters from Australia, but it is a healthy improvement in terms of the export index.
"We haven't made a farmgate price forecast – and no doubt the companies are still formulating their view on this – but you can safely say a 5-10pc increase in farmgate milk price for next season will be a reasonably safe bet from where we stand at the moment.
"However, the next month or so will be critical in attaining those levels."
In Australia, penetration of dairy products remained high with about 97pc of households buying dairy products, while sales of branded milk had bounced back against their private-label adversaries. This recovery coincided with the introduction of permeate-free milk on branded fresh milk from Lion and Parmalat.
"Supermarket share of private-label products dropped in 2012 across New South Wales, Victoria, Queensland and SA," Ms Bills said.
"It will be interesting to see if the branded products can keep that ground they've gained, because the supermarkets have made their private-label products permeate-free as well, which started to hit the shelves in November."
*Full report in Stock Journal, April 25 issue, 2013.