| SYDNEY, Sept 3
SYDNEY, Sept 3 Australian milk production is set
to rise for the first time in two years and may top the
country's official estimate, as rains boost pasture and cattle
feed prices drop.
Any increase would help processors looking to source milk to
meet rocketing demand for dairy products in China and other
Asian nations, although it would unlikely be large enough to
stop them running well below capacity.
Analysts and industry sources said milk output during the
2014/15 season, which starts July 1, could well be stronger than
the 2 percent rise to 9.3 billion litres predicted by the
Australian Bureau of Agricultural, Resource Economics and
"There is scope for growth above 2 percent," said Michael
Harvey, a senior analyst covering the dairy sector at Rabobank.
"While prices have come down, there is still good
profitability for many farmers."
Global milk prices fell 40 percent from a record-high hit in
February according to Global Dairy Trade, as supply disruptions
caused by adverse weather faded.
Australia is the world's third-largest dairy exporter behind
New Zealand and the European Union.
Plummeting feed prices, with the United States poised to
harvest a record corn crop, have also boosted the short-term
outlook for dairy farmers.
Industry body Dairy Australia sees milk output at 9.4
billion litres in 2014/15.
Major Australian dairy processors such as Murray Goulburn,
Bega Cheese, Warrnambool Cheese & Butter and Fonterra
have been looking to capitalise on strong Asian
demand as an expanding middle class develops a taste for western
Dairy processors either sell the milk fresh or use supplies
to produce products such as butter, cheese and baby formula.
But they have been struggling to source enough milk, with
farmers reluctant to invest heavily in dairy herds due to fears
of drought, especially after chunks of the country were ravaged
by dry weather last year.
"There is appetite for expansion but that is tempered by
caution," said John Droppert, an industry analyst at Dairy
"Farmers have been burnt before, so they are keen to take a
(Reporting by Colin Packham; Editing by Joseph Radford)