In Australia, an expected 1% year-on-year (YoY) increase in milk production to 8.5 million metric tons (mmt) in 2024 is attributed to a combination of factors, including a decline in beef cattle prices and the alleviation of labor shortages. The previous three years witnessed a decline in milk production due to widespread conversions of dairy farms to beef cattle farms, driven by less labor-intensive operations and better-controlled operating costs amid multi-year droughts.
The rebound in beef cattle supplies over the last 18 months led to a considerable drop in beef cattle prices. Although labor shortages persist, improvements have been noted with the return of working holiday makers and record levels of workers under the Pacific Australia Labor Mobility (PALM) scheme. The combination of improved labor availability and lower beef cattle prices has reduced the incentive for dairy farmers to transition to beef cattle farming. Driven by competition among domestic processors, strong farmgate milk prices are expected to further support increased milk production in 2024.
Accounting for 65% of production, Australia's high domestic consumption shields it from international price fluctuations. The ability to pass higher costs to domestic wholesalers intensifies competition for milk supply, leading to farmgate milk prices surpassing initial projections. This trend is opposite to New Zealand’s, which exports 90% of its milk production, influencing a price gap between Australian and New Zealand milk.
French dairy supply has experienced a significant decline since Sep-23, primarily due to adverse climatic incidents, including heatwaves, storms, and heavy rains. These events have impacted cow productivity and led to challenges such as mastitis and cell problems. Additionally, the availability of forage has been constrained despite the average quality. Corn silage, though of high quality, has negatively affected milk quantity due to the time required for starch fermentation.
While the fall collection is estimated to have decreased by around 2.6% YoY, recent weeks show signs of improvement. The decline in the dairy herd is easing, with a 1.9% month-on-month (MoM) decrease, and breeders have culled fewer cows throughout the year. However, the fall in cow milk prices in Oct-23 to USD 499 per thousand liters (L), with a USD 8.8 MoM decrease and falling below the previous year's price, poses challenges for the industry. The first price announcements for early 2024 indicate variations among dairies, with some nearing the USD 438 per thousand L threshold, while others maintain prices at the 2023 level, reflecting potential disruptions and disparities in the sector.
Over the course of ten months, the cumulative production of dairy products in France has seen a general YoY decrease. While packaged milk powders exhibit continued dynamism with a growth of 2% YoY, the production of powders, particularly lean varieties, is experiencing a slowdown. Cheese and butter production have slightly decreased by 1% YoY. Conversely, the production of packaged milk and yogurt remains stable. Cream manufacturing has received a substantial boost, driven by sustained domestic demand and active exports. Sales of organic dairy products in general stores have experienced a significant decline during the first 11 months of the year, with no signs of improvement in the latest periods. The decline is particularly pronounced for cheeses (-19% YoY) and cream (-14% YoY). This drop is attributed to the reduced promotion of organic dairy products by food brands, negatively impacting consumption.