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Ag News

NAB says higher dollar a challenge for Dairy

  • By: "Prime" Ag News
  • Jan 29, 2018

Dairy prices have trended downwards overall since mid last year, and although 2018 has brought some relief in USD terms, the higher AUD has eroded these gains.

Our forecasts do not point to major upside for global dairy prices in USD terms in the coming year, with any local gains coming primarily from our expectations of a lower AUD in the 70-75c range. However, the weakness in the USD (which recently saw the AUD touch 80 cents) could be a major challenge in the first half of this year.  

Farmgate prices look to be tracking reasonably well, with major processors all in the mid-$5 range in AUD terms. Given the AUD and global market trends, there may be limited upside from here, these prices are close to the long run average (AUD5.90/kg milk solids nationally over the last 8 years).

Seasonal conditions have been mixed, with Gippsland in particular seeing very dry conditions in 2017. Summer rain has been somewhat kinder in Victoria, although a drink would be welcome in much of the state. The Bureau of Meteorology’s outlook points to average to wetter than average conditions for the coming months. Still, we don’t expect major increases in Australian milk production this season.