SYDNEY, June 21 (Reuters) - Australia said it expects milk production in 2016/17 to fall 3 percent short of previous estimates as slaughter of animals in the country due to weaker farm-gate prices curbs supply.
Lower milk output at the world's fourth-largest dairy exporter could help support global prices that have more than halved since early 2014 amid a glut in world supplies and sluggish demand growth.
Australian milk production for the year to July 1, 2017 will total 9.5 million litres, versus 9.8 million litres forecast in March, the Australian Bureau of Agricultural and Resource Economics and Sciences (ABARES) said.
The revised outlook comes after the world's largest dairy exporter Fonterra Co-operative Group Ltd FCG.NZ and the listed arm of Australia's biggest milk processor Murray Goulburn MGC.AX slashed farm-gate prices earlier this year, citing excess global supplies. farmers have warned that the cuts will force them to slaughter cattle to raise cash, risking a fall in long-term production. The government in response has said it will set up a A$555 million ($414.31 million) loan plan for farmers hurt by the cuts. ABARES lifted its 2016/17 beef exports forecast by almost 2 percent as recent favourable weather across the east coast supports a recovery of the country's cattle industry.
ABARES said beef exports will total 1.10 million tonnes versus the March forecast of 1.08 million tonnes.
ABARES kept its forecast for Australian sugar production steady at 5.08 million tonnes for 2016/17. ($1 = 1.3396 Australian dollars)