Bushfires across Australia's east coast are set to pile on more pain for the country's dairy industry, already hurt by a prolonged drought, as processors in one of the world's largest exporters face tightening milk supplies.
Australia has been battling wildfires across swathes of its east coast for weeks, with the blazes scorching more than 6 million hectares of land, killing both wildlife and livestock, and claiming 24 lives.
The fires have swept through major dairy areas along the New South Wales south coast, where many producers have faced a three-year drought, and East Gippsland in Victoria. Bushfire-affected regions account for about a third of the country's milk output, data from industry group Dairy Australia shows.
It isn't yet possible to get a full picture, said Phin Ziebell, agribusiness analyst, National Australia Bank.
Hundreds, perhaps thousands of cattle will have been lost. We have to wait for the full assessment but the impact will be devastating.
Australia is the world's seventh-largest dairy exporter, supplying mainly Asian markets with products such as fresh milk, butter and cheese, as well as milk powder. Dairy is the country's fourth-biggest rural industry, worth US$2.3 billion, according to government figures.
Even before the fires, Australia's milk production was set to fall to a 22-year low due to drought, according to country's chief commodity forecaster, leaving processors scrambling for sufficient supplies to meet demand.
The processors were already under pressure beforehand as Australian milk production falls, said Michael Harvey, a dairy analyst at Rabobank.
Many farmers are now struggling to secure feed for their cattle, which could affect both milk production and breeding.
Australian Prime Minister Scott Morrison said on Monday nearly 4,000 livestock had been killed by the fires.
Bega Cheese, the biggest Australian-owned processor, said on Monday the fires had not directly affected its production facilities, but had hurt some suppliers.
We are working closely with our employees, dairy farm suppliers and freight providers to ensure milk can be delivered and processed, said chief executive Paul van Heerwaarden.
Bega shares fell as much as 10 per cent on Monday. Other big processors include Murray Goulburn, owned by Canada's Saputo, and New Zealand's Fonterra.