Positive sentiment towards the industry is up by 20% amongst Australian dairy farmers, but farmers are feeling more positive towards the outlook of their own businesses as opposed to the industry as a whole.
A year ago, if you asked Australian dairy farmers about their thoughts on the industry, only 44% would have indicated a positive sentiment (Dairy Australia, 2021a).
Twelve months later, the National Dairy Farmer Survey has revealed not only an increase in positive sentiment about the industry’s future, but an increase in profits and positive outlooks towards farmers’ own businesses (Dairy Australia, 2021b)
What factors are impacting Australian dairy farmer confidence?
Robust demand, improvement in operating conditions and global dynamics have supported a strong market outlook for Australian dairy (Dairy Australia, 2021b).
Higher milk prices are being driven by strong global demand which is outpacing supply, with favourable seasonal conditions in Australia supporting good pasture growth (ABARES, 2021).
In addition, low grain, hay and water prices and a steady global dairy supply is forecast, with key export markets in Asia strengthening demand for dairy products (ABARES, 2021).
So with Australia’s farmgate milk price forecast to rise by 2.4% to 50.7 centres per litre (ABARES, 2021), surely the farmgate milk price is playing a significant role in farmer sentiment?
According to Dairy Australia, farmer confidence has closely followed milk prices at certain times historically, but an interesting shift has occurred over the last five years where price appears to be having less of an impact of farmer sentiment overall (Dairy Australia 2021b).
Figure 1: Industry confidence vs milk price (Dairy Australia, 2021b)
Reduced feed availability and high input costs have subdued farmer sentiment as milk prices steadily rose from 2017, but business confidence has risen since 2019 to converge with industry sentiment for this season (Dairy Australia, 20921b).
Why are Dairy farmers more positive about their own business outlook?
While dairy farmer sentiment has seen an uplift overall across Australia, variations are evident across different regions.
Figure 2: Industry vs. own business confidence by region (Dairy Australia, 2021b)
For example, South Australian Dairy farmers were found to be most confident about the industry (83%) compared to subtropical regions (58%) (Dairy Australia, 2021b).
Tasmanian farmers were found to be the most confident about their own business (93%), with Rabobank recording Tasmanian farm confidence overall to have hit a six year high in June this year off the back of favourable opening milk contracts and good conditions leading into winter (Rabobank, 2021).
Understanding the factors driving farm business confidence
Farm business investment and management decisions are made in a context of volatility and relative uncertainty.
Understanding this variability and complexity relies on analysis of more nuanced aspects of farm management at scale, using national research to uncover insights beyond macro level market forces.
Actions such as investing in new machinery, buying an additional property or changing the milk factory to which they supply are just some examples of the key farm management decisions that affect farm performance and hence farm business confidence. Commodity prices are not the only factor at play.
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Dairy Australia (2021a). Dairy Situation Outlook June 2020. Retrieved 24 July, 2021 https://www.dairyaustralia.com.au/industry-statistics/industry-reports/situation-and-outlook-report#.YPuGH5Mza3I
Dairy Australia (2021b). Dairy Situation Outlook June 20921. Retrieved 24 July, 2021 https://www.dairyaustralia.com.au/industry-statistics/industry-reports/situation-and-outlook-report#.YPuGH5Mza3I
Rabobank. (2021). Rural confidence survey latest results: June Quarter 2021. Retrieved 24 June, 20921https://www.rabobank.com.au/knowledge/rural-confidence-survey/
ABARES (2021). Agricultural commodities: June quarter 2021. Australian Bureau of Agricultural and Resource Economics and Sciences. Canberra. CC BY 4.0. https://doi.org/10.25814/2ha4-vr39