livestock
Milk
- GVP $886 million est. Up 9% year-on-year.
- Producers responded to record high prices with increased supply.
- Processors faced difficult conditions with high farmgate prices, lower export prices and an increase in competition from imports.
NSW Dairy farmers enjoyed reasonably favourable conditions during 2023-24. Average farmgate prices were up 4%, overall production was up, and some key input costs eased slightly. Whilst the southeast of the state endured significant rainfall deficits, and some other areas also battled drier than average conditions, there were no repeats of the widespread flooding which occurred in the prior year. Although some costs were down, overall costs of production remain elevated and with lower farmgate prices for many in 2024-25 the outlook is more challenging. High farmgate prices and intense export market competition meant conditions were much more challenging for processors.
Production
NSW Rolling 12 month milk supply (million litres)
- Rolling 12 month milk supply
- 10 year average
Source:
Dairy Australia Production 2024
Milk production in NSW finally responded to higher prices and production increased 5.1% to just over 1 billion litres.
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State production bottomed in March 2023 and has continued to recover in every subsequent month. Whilst seasonal conditions varied across the state, on average conditions were better than last year and some easing in input costs also helped support growth in production. Nevertheless, production remains well below the 10-year average and 2023-24 was the second lowest annual production on record.
Price
After a significant price increase last year the farmgate price in NSW increased by a more moderate 3.8% to $11.60 kg/MS.
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Whilst the price increase was not as large as last year, some key input costs fell which should support an improvement in average dairy farmer profitability. The higher price also created significant challenges for dairy processors who also faced challenging export conditions and continued competition from imports. The estimated Commodity Milk Value (CMV) fell from $8.03/Kg MS in June 2023 to $6.99/Kg MS in June 2024 primarily due to falls in the export value of cheese and whey.
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On a more positive note retail prices for all dairy products continued to rise 17 though this did encourage a continued to shift to private label products.
Commodity Milk Value ($A/kg MS)
Source:
Milk Value Portal 2024
Dairy Retail Price Index, Sydney
Trade
NSW dairy exports increased 4% to $343 million supported by a 14% increase in exports to China. China now accounts for 71% of NSW’s dairy exports.
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National exports were also up with overall Australian exports increasing 2% to $3.1 billion.
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Victoria is responsible for the vast majority of Australian exports and whilst production increased slightly in Victoria, reduced global demand and high Australian prices created some challenges for exports. Australian exports to China decreased 18%. Although China remains an important customer, and Australia’s largest export customer, Dairy Australia notes that internal Chinese production has grown 30% over the last decade.
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A deterioration in economic conditions in China has also impacted demand for dairy products resulting in increasing inventory levels and a significant drop in dairy imports. This is an issue for all dairy exporters given the size and importance of the Chinese market.
Outlook
Whilst 2023-24 was a reasonable year for farmers, it was a very difficult year for the processing sector. Since 2022 over 10 factories have closed, and all major processors have indicated declining profitability. Processors are struggling with a competitive export market, lower demand from China, increasing import competition and high domestic farmgate prices. As a result, nearly all major processors offered lower opening milk prices for 2024-25, with an average decline of approximately 15%. Whilst farmers have enjoyed several good years due to higher prices, the cost of production has also been increasing. Rapidly increasing prices as processors chased supply in a declining milk pool has disguised the fact that the cost of production has been steadily increasing since 2021
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. A high cost of production will mean that the lower farmgate prices during 2024-25 will put more farmers under financial pressure and possibly reverse the recent recovery in the milk pool. Fortunately, many producers in NSW supply the drinking milk market where prices have been more stable. In fact, NORCO, a cooperative based in northern NSW has held its forecast milk price steady at $12.35/kg MS which up to 50% above the prices being received by producers in the southern export focused regions.
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Nevertheless, milk is transported from the south to the north and whilst ever Australia remains subject to export market competition (via both imports and exports) most dairy producers need to have a globally competitive cost of production.
DPIRD Initiatives in Focus
The Business of Dairy Podcast
This monthly Business of Dairy podcast looks at aspects of dairy business management, helping dairy farmers enhance their knowledge and skills to drive farm business performance.
The Business of Dairy podcast will look at aspects of management of dairy businesses from both within the farm gate and outside the farm gate, speaking to farmers and service providers with skills, information and knowledge of value to you and your business. We will bring to you monthly discussions on topics that will grow your knowledge and understanding of management areas that will drive strong farm business performance into the future.
This series is brought to you by the NSW DPI Dairy Business Advisory Unit with funding and support from the Hunter Local Land Services.
Find out more information or listen to the podcasts here.
