Forecast positive for those in dairy industry

On Wednesday, Tasmania’s largest dairy processor Fonterra upgraded its forecast average for the 2017-2018 dairy season.

The price move was described by those in the industry as an act of goodwill on behalf of the company, which has appeared to piggyback off the demise of Murray Goulburn in recent times. Cynics could say it is Fonterra offering a olive branch to entice suppliers back to the brand.

Four weeks ago, the company announced its forecast range starting at $5.30, with the additional 40 cents increasing it to $5.70 per kilogram of milk solids.

At the time, Fonterra Australia's managing director Rene Dedoncker said his company was in a much stronger position than it was the previous year. That pricing position six weeks out from the start of the season was made so farmers could plan for the season ahead, according to Mr Dedoncker.

It has now upgraded its forecast closing range by 10 cents, to $5.40 to $5.80 per kilogram of milk solids.

It means when coupled with Fonterra’s additional payment for some suppliers of 40 cents, farmers can expect to receive $5.70, with a forecast price range of $5.80 to $6.20 per kilogram of milk solids.

The Tasmanian diary industry has experienced a turbulent 12 months and it is finally welcome news for those Tasmanian farmers doing it tough to see something positive happening in the sector.

According to Dairy Australia’s Situation and Outlook report for June 2017, confidence in the industry has suffered because of seasonal and pricing pressures – think of the June 2016 floods and the previous year’s slim farmgate prices.

Farmers have changed their farm management responses, with nearly half of those surveyed for the Dairy Australia report obtaining a new loan to  cope with the pressures or made cuts to herd sizes.

However, there is good news. The rise in the global milk markets has put the industry in good stead for the forecast season. The Chinese market has improved.

Dairy Australia’s Food Service Index has shown that there is continued growth in the food service sector, with turnover growing by 4.3 per cent in the 12 months to February.

There's no doubt that the past year has been difficult for anyone in dairy. With an increase in the gate price, and more certainty around how they can plan for the upcoming season, things are starting to look a little brighter.