Positive outlook for Dairy recovery
Story Added : 02nd June 2011
The bank’s head of southern Australia agribusiness, Neil Findlay, said the outlook for dairy is positive.
“NAB is forecasting a slight fall in the weighted average dairy price in 2011-12, down from its recent peak. However, the predicted June 2012 price of 4450 USD/tonne is still almost 40 per cent higher than the average over the past decade,” Mr Findlay said.
“A rapid correction appears unlikely, because much of the increased production in the northern hemisphere in response to the prices is being absorbed through rising consumption.”
NAB said emerging economies such as China will continue to play a key role in keeping prices high and are likely to contribute more than 60 per cent of global growth in 2011-12.
“Farmers in southern regions should expect improved prices through 2011-12, and this is evident as processors announce opening prices across Victoria and Tasmania,” Mr Findlay said.
“The impact of the high Aussie dollar is starting to be felt across the dairy export sector. NAB expects the currency to remain supported over the near term, although it is anticipated to weaken from around mid 2011-12.”
Mr Findlay said while the outlook for dairy is bright, confidence is still tentative as the industry emerges from a challenging period.
“Rising input costs due to drought plus declining farm gate prices saw average profits decline significantly in 2009-10. While they have bounced back in 2010-11 at least another decent season is required before we see any significant ramping up of capacity and production,” he said.
“If anything, the improved cash flow this year will see many farmers taking the opportunity to pay down debt.”