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Dairy Australia - Market News


13 December 2013

Dairy Australia - Fortnightly Update 13 December 2013Dairy Australia - Fortnightly Update 13 December 2013

Fonterra announces an unchanged 2013/14 Farmgate Milk Price forecast of NZ$8.30/kg MS, Commodity prices were stronger again at the 5 December GDT auction and Land O’Lakes will soon become the second US seller on GDT and the sixth SMP seller.
Dairy Australia - Market News

Global Developments

Fonterra this week announced an unchanged 2013/14 Farmgate Milk Price forecast of NZ$8.30/kg MS ($7.69/kg MS in Australian terms). In determining the forecast, the Board has exercised its discretionary powers for ‘abnormal circumstances.’ According to Chairman John Wilson, the price differential between ‘reference’ and ‘non-reference products’ coupled with plant constraints prevents Fonterra from achieving the theoretical $9.00/kg MS return derived using the standard Milk Price Manual process.

Commodity prices were stronger again at the 5 December GlobalDairyTrade (GDT) auction (event 105). The GDT Price Index gained 3.9% as all products except cheddar (down 1.5% to US$4,501/t) registered gains. WMP buyers soaked up another record Contract 1 & 2 offering at an average price of US$5,035/t (up 3.4%) while SMP from all origins—but particularly the US—sold higher; the average reaching US$4,791/t (up 5.6%). AMF (up 2.7% to US$5,395/t) reached a 2013 high, while butter (up 4.5% to US$3,750/t) prices firmed and rennet casein bounced 18.9% higher from last fortnight’s sharp drop to reach an all time GDT high of US$11,011/t. For more information, visit www.globaldairytrade.info.

US cooperative Land O’Lakes will soon become the second US seller on GDT and the sixth SMP seller, with three having signed up this year. Land O’Lakes is the fifth largest US dairy firm in revenue terms, and will offer SMP from March 2014, with butter to follow later in the year. The announcement follows existing seller Arla Foods’ notice that it will be expanding its offering from December 17th by trading UK produced SMP on the platform.

The Australian Front

Australia concludes Korea-Australia Free Trade Agreement (KAFTA): Australia has concluded a free trade agreement with the Republic of Korea (ROK), the country’s 10th largest dairy market (by value: 2012/13). Australian dairy exporters stand to benefit from timely implementation of KAFTA, which will provide opportunities via additional market access for cheese, butter and infant formula. KAFTA’s completion prompts optimism about the conclusion of FTAs with Japan and China.

Murray Goulburn (MG) offloading Laverton property: The Australian newspaper reported that real estate asset managers Industry Superannuation Property Trust (ISPT) and Charter Hall are competing to purchase MG’s Integrated Logistics Centre (ILC) at Laverton in Melbourne’s west. MG is expected to enter into a sale-andleaseback arrangement that could bolster its finances to support corporate activity and/or capital investment.

Warrnambool Cheese & Butter (WCB) takeover in suspended animation: MG’s application to the Takeover Panel (Australia’s takeover arbitrator) has delayed any early conclusion to the three-way contest; MG are seeking the arbitrator to order that Saputo (SAP) reinstate the special dividends originally attached to its offer for WCB, and refrain from providing the additional 20c per share under the revised offer. The Takeover Panel is expected to make a ruling today (13 Dec.); however, public hearings on MG’s case for regulatory approval at the Australian Competition Tribunal (ACT) are not expected to start until mid-Feb. ‘14. Meanwhile, competing bidder Bega Cheese (BGA) on 11 Dec. extended the deadline for acceptance of its offer of 1.5 BGA shares + $2 cash ($8.60 at time of writing) until 20 Dec; and despite being unable to process acceptances on its offer of $9.00 per share (+20c per share for >50% of WCB), SAP this morning announced to the ASX that it has lifted its stake in WCB to 15.71% and extended the deadline for acceptance of its offer to 20 Dec.

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