DAIRY commodity prices have rebounded but local farmers will face a margin squeeze for another year.
According to Dairy Australia’s October Situation and Outlook, decreased milk production from Australia, New Zealand and Europe is helping ease the downward pressure on global commodity pricing caused by the oversupply issue of recent years.
Australia’s milk production is forecast to drop five per cent over the full season for 2016/17, as a response to low milk prices and tight margins.
Dairy Australia senior analyst John Droppert said many growers would opt to defer investment and focus on management to breakeven points.
He said processors would encounter obstacles in securing supply in the short term.
But despite the tumultuous market, there have been a range of developments in the corporate sector.
Fonterra has announced a further investment of $4.3 million in its Wynyard, Tasmania, cheese plant, streamlining of its warehousing operations, and the sale of its Wagga Riverina Fresh milk business. Midfield Group’s new powder dryer at Penola, South Australia, continues to take shape, with the group inking an agreement with Louis Dreyfus that will see the latter market the finished product across the US, Middle East and southern Asia. Camperdown Dairy International is shelving its planned $500m vertically integrated milk powder operation, while Murray Goulburn has reiterated plans to build a new nutritionals plant. Inner Mongolia Fuyuan Farming obtained a 79pc stake in Burra Foods, while Warrnambool Cheese and Butter raised $142m with major shareholder Saputo failing to dislodge Lion from its 10pc blocking stake.
