AUSTRALIA'S dairy industry is starting to feel the pinch of falling commodity prices, tight seasonal conditions and the global financial crisis.
Dairy Australia, in its Situation and Outlook update released last week, said the cuts in global growth forecasts are combining with the volatility of exchange rates and input prices, to increase the uncertainty facing Australia's dairy industry.
Despite the uncertainty overseas, almost 90 per cent of 340 dairy farmers surveyed last month remain positive about the future of the industry, buoyed by strong opening farmgate prices.
Dairy Australia managing director Mike Ginnivan said a fall in demand for dairy products in developing countries, combined with increased supply, had resulted in dairy commodity prices dipping almost 20 per cent in US dollar terms.
Dairy Australia senior analyst Joanne Bills stressed that while the falling dollar was a positive, it did not necessarily completely negate the decline in commodity prices for exporters.
"While the simultaneous depreciation of the Australian dollar has largely offset the impact on spot returns, the final impact on returns to exporters this year will depend on individual company hedging policies," Ms Bills said.
"It is still very early days to know how broad the global crisis will reach and what it all means."
Dairy Australia's forecast for this season's total production remains up 1 per cent to about 9.3 billion litres - the first increase in three seasons.
