Global demand for dairy products has continued to grow, but slower growth in supplies from the major exporting countries has driven world dairy prices sharply higher.

ABARE Principal Research Economist Dale Ashton said that despite the impact of drought on farm incomes in 2006-07, many dairy farms are well placed to respond to higher milk prices because of investments in new technologies and management practices.

“Forecast higher Australian farm gate milk prices will provide an incentive for dairy farmers to rebuild dairy herds and increase milk production capacity,” Mr Ashton told OUTLOOK delegates today.

“When the positive impacts of past investments in new technologies, plant and equipment are combined with higher milk prices, the prospects for the dairy industry look favourable.”

Mal Beniston, from milk processor Murray Goulburn Cooperative, highlighted the challenges faced by the Australian dairy industry. “For many years a low cost of milk production underpinned our global competitiveness. We are rapidly losing this position,” he said.

Mr Beniston said that considering different farming models and maintaining a low cost supply chain was the way forward. “If we can get this right, Australia will be well placed in the global dairy market, while medium to long-term demand versus supply balance has never looked better for producers. The challenge is largely at home and within our control,” he said.

Janet Moxey, of Moxey Farms, spoke of the difficulties in dairy farming, including urban encroachment, industry deregulation and maintaining profitability in times of drought. “But the rewards are there, if we concentrate on our people, our systems and innovation,” she said.

“Dairying is a complex business, we need to achieve balance between many elements, while maintaining a focus on the big picture.”

Ms Moxey also spoke of the need to embrace change. “In today's world, change is the only constant. If we are not changing, we are going backward,” she said.