Agro Perspectiva

Milk production in 2022 in Australia is forecast to increase moderately to 9.1 MMT

16.11.2021 17:59 "Agro Perspectiva" (Kyiv) — Following are selected highlights from a report issued by a U. S. Department of Agriculture attache in The Canberra, milk production in 2022 in Australia is forecast to increase moderately to 9.1 million metric tons (MMT) after a falling in 2021 to an estimated 9.0 MMT, a one percent decline from 2020. The shortage of labor influenced by COVID-19 lockdowns in the major dairy farming states and Australia’s international border closure, led to some dairy farms partially or fully transitioning to less labor-intensive beef cattle production. This had a negative impact on milk production in 2021 and is also expected to limit the growth in milk production for 2022. Despite lower milk production in 2021, insatiable demand for dairy products by China has driven a strong growth in exports of milk and all of the dairy manufactured product segments.

Executive Summary

Milk production in 2022 in Australia is forecast to increase moderately to 9.1 million metric tons (MMT) after a falling in 2021 to an estimated 9.0 MMT, a one percent decline from 2020. External forces have had a negative impact on milk production in 2021 which is also expected to limit the growth in production for 2022. The shortage of labor influenced by COVID-19 lockdowns in the major dairy farming states and Australia’s international border closure, has created challenges for some dairy farmers. This has also led to some dairy farms partially or fully transitioning to less labor-intensive beef cattle production encouraged by record beef prices in Australia. In addition, overly wet conditions during the winter in 2021 in some major dairy farming regions negatively impacted milk production.

Better than average rainfall for dairy farmers in 2021 has set up a very good pasture and fodder production season, and along with average to below average grain prices and near record milk prices, has established a very positive outlook leading into 2022. Although these factors would result in expectations for strong production growth, negative external forces such as labor issues and farms transitioning from dairy are anticipated to continue to have an impact. The one positive feature that could support the dairy industry in 2022 is that international borders are expected to open in two of the major dairy farming states by the start of 2022, which could allow the labor shortage to gradually ease during the year. However, beef prices in Australia are expected to remain very high in 2022 and may continue to cause some further transitioning away from dairy farming.

Fresh milk consumption in 2022 is forecast to increase slightly by around one percent to 2.5 MMT as Australia transitions away from COVID-19-related lockdowns. This is expected to account for 27 percent of overall milk production while factory use consumption is also forecast to rise at a similar rate to 6.225 MMT, from an estimated 6.185 MMT in 2021.

A widening gap in butter and whole milk powder (WMP) prices over cheese in the world market in 2021 resulted in manufacturers making a short-term shift away from cheese, reversing the trend in recent years of channelling more and more milk into cheese production. Insatiable demand for dairy products by China in particular has resulted in Australian manufacturers increasing butter and WMP production, away from cheese in 2021. Despite a decline in milk production, this demand has also driven strong growth in exports of milk and all of the manufactured product segments in 2021, resulting in depleting stock levels. Some analysts indicate that China has built up dairy stock levels during 2021 and that their demand is likely to ease by the end of 2021. Australian dairy manufacturers in 2022 are expected to revert back towards the previous path of increasing cheese production, with cheese anticipated to account for around 57 percent of manufactured milk and 39 percent of overall milk production in the forecast year.