Rabobank: Industry at a crossroads

by | Oct 27, 2021 | Australia, News

In its latest report Australian Dairy Industry: At an important juncture, Rabobank describes an industry that after droughts, floods and bushfires and unprecedented turmoil in international markets is enjoying its third consecutive season of record-breaking profits. Favourable seasonal conditions, high farmgate prices and a shift in the balance of power within the supply chain attributed to the Dairy Code of Conduct means the industry is in a strong position to invest in expanding national milk production – which Rabobank believes is vital for future success. According to Rabobank’s latest Rural Confidence Survey, investment intentions reached decade highs among Australian farm businesses in mid-2021, which could make way for well-executed long-term investments that help reignite industry growth.

Rabobank’s senior analyst Michael Harvey said expanding milk production is essential to the growth prospects of the industry, calling the current supply response ‘underwhelming’ despite the extended period of farmgate profitability. In 2020/21, the Australian dairy supply chain processed 8.86bn litres, 950m litres less than in 2014/15 with 55% of the fall coming from the northern Victoria irrigated region. Slow milk growth reflects a combination of wetter-than-average conditions in key production regions, sustained farm exits, strong livestock trading conditions and labour shortages. Globally the report says Australia’s competitiveness will be tested in its ability to compete in export markets against growing milk pools from outside New Zealand.