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Dairy Markets Roundup: Outlook positive,Fonterra Shares Up

14 January 2013

GLOBAL - Dairy product prices entered the New Year on a positive note, with the first Global DairyTrade (GDT) auction for the year (event 83) seeing a 2 per cent increase in the Trade-Weighted Index (TWI), write market analysts at Dairy Australia.

Price rises for both the key powders were more than enough to offset mixed results in the smaller-volume products, with skimmed milk powder (SMP) in particular chalking up a 4.7 per cent increase in its average price to US$3,572/t. WMP prices firmed by an average of 1.6 per cent to close at US$3,199/t.

In a reflection of how different segments of the market have fared recently, the average SMP price at this event was 9 per cent above that at event 59 exactly one year earlier (03/01/2012), whilst the average WMP price was 10 per cent lower.

AMF was down slightly (0.2 per cent) on the previous event’s prices to US$3,169/t, whilst cheese and rennet casein also lost ground.

Full results at

Around 50 Westland Milk Products suppliers on the west coast of New Zealand’s South Island were isolated by flooding for several days last week, leading to an unknown volume of milk being dumped.

Notwithstanding the heavy rainfall, the January-March rainfall outlook for NZ suggests most of the country will experience near-average conditions, with soil moisture around ‘normal’ levels and average to below average temperatures.

Units in the Fonterra Shareholders’ Fund (FSF) continue to appreciate 6 weeks after opening at NZ$6.66 (A$5.28). Having gained almost 25 per cent on their first day of trading, the price of the units slumped briefly in early December before a sharp rise that has preceded a period of steady rise to yesterday’s closing price of NZ$7.35 (A$5.85).

Under the structure of the US$432million (A$413m) float, unit holders earn the right to dividend payments, but not voting rights - which remain restricted to Fonterra's 10,500 NZ farmer shareholders. USDA data shows November US milk production of 7.2 billion litres – 1 per cent higher than November 2011.

While positive growth has resumed following contractions in September and October, this remains slower than the 3-4 per cent rates seen at the beginning of the year and consequently the year-to-date growth rate for 2012 has eased further – to 1.8 per cent.

Due to extensive earlier culling, the national herd size is estimated to be 20,000 cows smaller than this time last year, however increased per-cow production has offset this.

The USDA sees the national herd declining further during 2013, finishing the year around 60,000 head lower. With some further increase in per-cow production, total 2013 US milk output is expected to be on par with 2012.

TheCattleSite News Desk

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