MARKET volatility remains, but there are still paths to profit, according to Dairy Australia managing director Ian Halliday.
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Speaking at the recent Dairy SA annual conference in McLaren Vale, Mr Halliday said global dairy commodity prices were their lowest in the past six years, but Australia’s strong domestic market and currency had cushioned the nation from the worst.
“There is no doubt the Australian dollar has helped us the past 12 to 18 months,” he said.
Domestic sales make up about two-thirds of the total market and are holding steady, in-line with population growth.
He said processors were also looking further along the value chain, with fresh milk about 25 per cent of the market and cheese about 31pc.
This is different to New Zealand, where 80pc of the dairy industry relies on the commodity market, such as milk powder, and 95pc of milk produced is exported.
The global market has suffered with increased production from the European Union moving into Australia’s traditional markets in Asia. China had stockpiles of product and had decreased its buying, while Russia has disappeared from the market place.
This had led to Fonterra suggesting NZ dairyfarmers might expect a farmgate price of $3.90 a kilogram milk solids, against costs of production nearing $5.25/kg.
Mr Halliday said these influences meant increased volatility in the market until at least 2018.
“With Russia still out of the market, the recovery expected sometime this year is well into next year,” he said.
He said even if the Russian market opened up again, it was unlikely to be at the same values with little money available for high-value products.
Mr Halliday said there were a number of Dairy Australia programs looking at profitability.
“Putting aside the issue of milk price, there is not a lot we can do about that apart from moving up the value chain,” he said.
“So we’re looking at what impediments there are to growth… and trying to determine if the impediments are real and critical. I do think it’s important when talking to investors – we need a clear, consistent message.”
He said other projects also looked at key areas to farm profitability including pastures, genetic merit cows, better business decisions and higher nutrient efficiencies. These are paying off with a forage value index, similar to the breeding index in animals, due to be launched in November, and a ryegrass cross-breeding program indicating yield increases up to 20pc.
Genetic merit was another area of focus, with the potential to gain an extra $23 a cow each year. Three new indices were released last year to ease breeding decisions.
Mr Halliday said there were also programs to help decision-making, with benchmarking program Dairy Base having more than 1000 registered farms.
Mr Halliday said discussion groups were another area of focus for Dairy Australia.
“SA probably leads the way,” he said, with more than 50pc of farms involved in the 12 groups available.
