Following a surge in dairy herds being culled in drought-affected regions, Dairy Australia is set to revise its national milk production forecasts downwards by the end of the month.
Dairy Australia senior analyst John Droppert forecast a five per cent spike in the number of dairy cattle being culled this year as a consequence of prolonged drought, high water and feed prices, and low milk returns.
This is on top of the average 20pc turnover of dairy cattle culled annually.
On the back of forced destocking in all NSW dairy producing regions, as well as northern Victoria, DA is set to revise its milk production forecast to better reflected the contraction in herd numbers and subsequent expected fall in milk production.
“The impact of the current rate of culling is likely to extend beyond this season,” Mr Droppert said.
“There will be a revision downwards.
“Culling the low end of the herd will mean the average milk production per cow is higher. But on the other hand, poorer quality feed and people cutting grain back means per-cow milk could be down.”
Farmers appeared to be culling earlier, known as “frontloading”, resulting in lower production volumes later in the year.
“So 25pc will not necessarily be the annualised increase," he said.
"On the contrary, if we don’t get any rain in October, there could be another round (of culling) to come through.”
Mr Droppert said as the outlook for feed prices became clearer, farmers would have a better indication on what their margins were going to be.
“This will impact the next round of cull decisions ahead of spring pasture growth slowing down," he said.
"Looking to next season, a reduced herd and the culling of young stock that’s been reported will also mean a slower recovery.”
Northern Victorian dairy processor, Australian Consolidated Milk, managing director Michael Auld said the major impact of the widespread dairy cow culling would not be felt for some months.
“We are not seeing a big impact at the moment, although supply is down slightly,” Mr Auld said.
“The longer it goes, the harder it is, even for the most resilient – even if they have strategies in place.
“Farmers don’t carry any passengers in the herd, making sure only the best, most productive cows are maintained, with a view to getting an autumn break.
"If we don’t get a break, it's going to be very serious. It could be a major pull back on production.”
ACM is set to open a new $80 million factory at Girgarre, Vic, and is expected to start production in November. He said ACM had a diversified supply range, enabling it to maintain production.