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Dairy Australia - Market News


23 August 2013

Dairy Australia - Fortnightly Update 23 August 2013Dairy Australia - Fortnightly Update 23 August 2013

GDT prices show further resilience this week, with the GDT Price Index increasing 2.3% at event 98—reversing the decline of the previous auction, NZ dairy industry endures another tense fortnight and USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report foreshadows a modest increase to US milk production in 2013.
Dairy Australia - Market News

Global Developments

Global Dairy Trade (GDT) prices have shown further resilience this week, with the GDT Price Index increasing 2.3% at event 98—reversing the decline of the previous auction. WMP pushed 2.7% higher on average to reach US$5,124/t, with only US$100/t separating different contract periods. The exception was contract 1 (September delivery), for which Amul product was the only option on offer. SMP eased 0.7% on average to US$4,426/t, as strong increases for DairyAmerica September deliveries were offset by modest falls across the Fonterra offering (encompassing October contracts and beyond). The key fats were stronger, with AMF up 7.1% to US$4,931/t and butter gaining 3.3% to US$3,614/t. Full results at: www.globaldairytrade.info

New Zealand’s dairy industry has endured another tense fortnight, having had Fonterra’s recent botulism scare followed by a joint announcement from Westland Milk Products and the Ministry for Primary Industries (MPI) that a small volume of lactoferrin powder with elevated nitrate levels had been exported to China—some via Tatua Cooperative which had purchased the product from Westland. The affected product has since been traced and quarantined, and is not regarded as having constituted a food safety threat. Meanwhile, Fonterra has announced that a shipment of milk powder was halted at the Chinese border in May, after tests showed nitrate levels slightly above those allowable under Chinese standards—but well within the New Zealand standard. The product had previously been tested in New Zealand and returned results acceptable under both regimes. The head of NZ Milk Products, Gary Romano, has resigned in the wake of the botulism issue, whilst two other Fonterra executives have reportedly been placed on leave.

The USDA’s latest World Agricultural Supply and Demand Estimates (WASDE) report foreshadows a modest increase to US milk production in 2013, followed by firmer growth in 2014 that would take that year’s output to almost 93 billion litres. The improved outlook for US producers comes amid renewed speculation that the country has the potential to become far more significant on the global stage as its on-farm cost competitiveness improves, if the post-farmgate supply chain is able to adapt to meeting the requirements of export—not just the traditional domestic—markets.

The Australian Front

Bega Cheese (BGA) announced its results for the year-ended 30 June 2013: revenue up 8.3% to $1.01bn, EBITDA up 13.2% to $64.3m, profit after tax up 24.6% to $25.4m. Management highlighted revenue growth in nutritionals and contract packing with improved gross margins supporting higher EBITDA and profit after tax.

Devondale-Murray Goulburn (MG) has announced another step-up: 9c kg/butterfat and 19c kg/protein, taking the cooperative’s weighted-average price to $5.86 per kg MS; and its full-year forecast range to $5.95-$6.20 per kg MS, in view of still favourable international market conditions and a weaker Australian dollar. The co-operative also announced 78 redundancies across 6 sites to ensure greater competitiveness.

Local media reports recently confirmed another new UHT plant is under construction in Victoria: the $40m Shepparton plant is a joint venture between Australian Consolidated Milk and Pactum Australia [part of ASX-listed Freedom Foods Group (FNP)]. The plant is expected to create 100 jobs and obtain supply from up to 200 farms, with product earmarked mainly for export.

Australian Dairy Farmers Co-operative has commenced milk collections, reportedly reaching its 20 million target, supplying to dairy processor Procal Dairies.

Tasmania’s Bruny Island Cheese Co. won the title of 2013 Telstra Australian Business of the Year—recognition for local specialty cheesemakers.

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