Australian Dairy 2022/23 Outlook: Be Confident, But Beware

Planning and budgeting decisions for the 2022/23 season are well underway across the Australian dairy supply chain against a backdrop of moving parts.

Main highlights:

- As the 2022/23 season approaches, dairy farmer confidence levels are high, underpinned by elevated milk prices and a favourable seasonal outlook. 

- Published milk price signals for the 2022/23 season are strong. Dairy farmers are enjoying speedy announcements, and more importantly, record-high minimum price offers which will support cash flow. 

- The dairy commodity basket is doing the heavy lifting in pushing the farmgate milk price to new heights. While global dairy fundamentals remain price supportive, a market correction looms on the horizon as a subtle rebalance in global markets occurs. 

- Meanwhile, turbulence looms large with continuing impacts from seismic global events, which are still expected to play out in dairy markets. This commodity price risk, and its impact on market returns, will need to be navigated. 

- Rabobank's initial modelled farmgate milk price for southern Australia in 2022/23 stands at AUD 8.40/kgMS. This means there will be little room for error. 

- High milk prices will support profitability, but other drivers of profitability require close attention. Profit margins for dairy farms are under pressure on a number of fronts. 

- With dairy farmers facing a jump in their cost base in 2022/23, farm profitability is still within reach, but margins will be lower in 2022/23 versus the current season. As a result, appropriate cost control and risk management strategies are needed.