Australian dairy sector in heavy weather

The Australian government warned at the beginning of this year that a dairy shortage may be emerging. However, this was a response to the forest fires, but now another danger lurks. More and more Australian dairy farmers are forced to downsize or even stop.

$1-dollar-a-litre fiasco
While the $1-dollar-a-litre-price (Australian dollar) that was abolished in March last year should have provided a better income, this does not appear to be true. When this rule was abolished, Australian supermarket chains promised that dairy farmers would receive an extra $0,10 per liter, but to date this has remained at a paltry $0,01 to $0,03 extra. And this while production costs have increased by almost $0,10.

Nearly 10% of dairy cows in western Australia are now lined up for export or slaughter. The sharp increase in production costs means that dairy farmers are forced to get rid of cows to reduce costs or to be able to pay them at all. The situation, together with the impact of the bushfires, poses a potential threat to Australia's milk supply. 

Shortage of milk takes a toll on Lactalis
Dairy chain Lactalis recently felt forced to close its dairy factory in Rockhampton (Queensland) due to declining milk supplies. Although this has been looming for a number of years, the current situation has not helped. The dairy chain has also decided to reduce yoghurt production at the South Brisbane factory. There is simply not enough milk to run at full speed.

The events are not surprising considering the scale of Australia's milk production. In the past calendar year 2019, this amounted to almost 8,32 billion kilos. This is almost 5,4% lower than for the whole of 2018 and almost 5,8% lower than the 5-year average. Milk production in December amounted to 836,6 million kilos, almost equal to the supply in the last month of 2018. This means that the supply appears to be slowly recovering. The Australian milk season always runs from July to June