Dairy Australia Manager of Strategy and Knowledge, Joanne Bills, said the rapid, unprecedented fall in international markets and recent cuts to current season prices had created uncertainty and undermined confidence within the industry.
“The downturn has sparked significant drops in international commodity prices in recent months from their record highs, which has had an inevitable effect on the returns farmers receive for their milk,” said Bills.
She added that the outlook over the next 12 months remained uncertain, with some conflicting signals and still a lot of potential volatility in the market outlook as the global downturn unfolds: “Slowing economic expansion in China – a key market underpinning growing consumer demand – has further added to the uncertainty.”
But it wasn’t all bad news for Australian farmers, as easing input prices should cushion some of the blow. “Lower grain and fuel prices, also the result of the global economic downturn, should start flowing through to farmers over the coming months. While these lower input prices will help protect margins, managing cash flows in the face of significant milk price cuts will be a challenge for most of 2009.”
Given the uncertain world situation, Dairy Australia advised farmers that it was still too early to make a call on all the factors affecting future prices and margins. Now is not the time to be making snap decisions.
“Dairy Australia will step up its market analysis and communication to help the industry better understand its position as quickly as possible,” said Bills. “We will release an additional Situation and Outlook update in March to assist farmers and dairy companies in their planning for the 2009-10 season.”
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