The March Dairy Industry Situation and Outlook shows that despite challenges Australia’s dairy industry remains profitable with strong demand and weak supply continuing to drive commodity values higher. Slowing milk production in other key dairying regions are supporting prices, logistics issues continue to cause disruptions and delay. Russia’s invasion of Ukraine is expected to put more pressure on freight going forward.

Labour shortages, farm exits, and high cow culling rates will continue to affect the national milk pool. Dairy Australia has revised its forecast to indicate a drop of 1% – 3% in national milk production this season, to a range of 8.59bn – 8.77bn litres. Across the country, milk growth has outpaced expectations in NSW and northern Victoria. However milk production in Tasmania, western Victoria and Gippsland continue to slide with wet weather in spring lowering the quality of feed.

Falling Australian milk production has limited exports and resulted in further rationalisation, with Saputo announcing line closures at some manufacturing sites. Inflationary pressures are unlikely to abate bringing pressures and margin impacts across the supply chain.