MD_DA120 Oceania Dairy Market Overview Report 9 - Released on February 27, 2020 AUSTRALIA: January – December 2019 full year milk production in Australia decreased 4.3 percent from calendar year 2018, according to Dairy Australia. Australia now officially joins New Zealand with calendar year 2019 milk production below 2018. More detailed production data are in the table which follows. For 2019, average milkfat was steady with 2018. Average protein for 2019 was up 3.8 percent from 2018. AUSTRALIA MILK PRODUCTION, MILKFAT and PROTEIN July - December 2019 December 2019 Million Percent Change Percentage State Liters From 1 Year Ago Milkfat Protein New South Wales 554.4 -7.1 4.00 3.25 Victoria 3,229.1 -3.5 4.10 3.43 Queensland 167.5 -14.9 3.90 3.23 South Australia 240.2 -10.2 3.82 3.24 Western Australia 190.1 -4.5 3.87 3.17 Tasmania 496.1 +1.0 4.20 3.53 Australia (Total) 4,877.5 -4.3 4.07* 3.40** * 0.0 percent from prior year period ** +3.8 percent from prior year period Data from Dairy Australia ¬¬ Some factors present challenges to Australian milk production. Dairy officials in Australia mention unease among some dairy producers in Western Australia. A combination of production costs and what is perceived as weak milk pay prices are resulting in more herd culling or outright herd sales for slaughter or export. Some observers believe the impact on milk production could be up to a 10 percent decline in the region. Seasonal milk production in Australia typically reaches close to the seasonal low in February, then remains near the low through June when the production year ends. Thus, milk production for the remaining months of this season will be relatively constrained in making any significant impact on accrued seasonal milk production so far. For this, among many reasons, such as the fire and drought impacts, dairy experts in Australia expect seasonal milk production to finish the production year below last season volumes. With Queensland leading most Australian regions in weaker milk production, dairy processing capacity is increasingly not needed. This is leading to a foreign owned Queensland dairy plant closure by the end of February. Another Queensland dairy plant owned by the same firm is reducing production of yogurt. This typifies a sad cycle where lower milk production results in surplus processing plant closures – which reduces options for remaining dairy producers. NEW ZEALAND: Some New Zealand based dairy officials are talking about slightly lower milk production helping dairy producers overall by helping to maintain pay prices. Lower production relates to health concerns and weather factors. The quarantines in China have resulted in a big decline in eating out and in store food shopping in affected areas. Dairy processing is reduced. Fewer remaining working port workers are available to unload shipments. Internal logistics have slowed, especially trucking. Whatever the tenure of this coronavirus impact, it is an impact now which acts to depress pricing. Weather in New Zealand may help to slow milk production and thereby generate upward price pressure. Dry weather in the North and flooding in the South are impacting milk production. Some experts believe that the balancing out may help to keep milk pay prices higher. There are some dairy observers who in recent weeks have opined that the effects of coronavirus will be short-lived. Yes, that may be. Yet no one really knows. Just this week, after many days of commentary that the virus will be short lived, global stock markets on several continents plummeted, supposedly on new fears of coronavirus. This virus is a major unknown risk factor. While this is generally a dry period in New Zealand, this year is exceptionally dry. In some of the hardest hit areas, the soil is described as baked. Some aquifers are at decades low levels. The government has formally declared drought conditions in some areas of the country. Even well-prepared dairy producers are vulnerable to overwhelmingly prolonged periods of inadequate rain. A dairy cooperative has begun hauling water to some especially dry areas in milk tank trucks, then hauling milk out. There is growing dairy producer distress in Waikato, an area on the upper North island. Extremely dry weather, with very little rain expected in coming weeks, challenges dairy producers in maintaining herds. Feed and water limitations are at issue. Reducing herd sizes has become more appealing to some. However, this is so popular that reportedly some producers face a three-week delay until cows can be received by various meet processors. Even where herds are maintained, it is increasingly popular to dry off cows early. All of this could take a toll on milk production. Information for the period February 17 - 28, 2020, issued biweekly Published by: Dairy Market News - Madison, WI Eric Graf, 608.422.8590 Email: Eric.Graf@usda.gov Additional Dairy Market News Information: Dairy Market News (DMN) by Phone: (608)422-8602 DMN Website: https://www.ams.usda.gov/market-news/dairy DMN MARS (My Market News): https://mymarketnews.ams.usda.gov