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Dairy Australia - Market News


24 February 2014

Dairy Australia - Fortnightly Update 21 February 2014Dairy Australia - Fortnightly Update 21 February 2014

GlobalDairyTrade event 110 concluded this week with the GDT Price Index down 1.2%, DairyAmerica and Fonterra have confirmed they will not renew the export agreement, DairyAmerica and Fonterra have confirmed they will not renew the export agreement, Fonterra has announced further expansion works, with NZ$32m to be spent boosting sliced cheese capacity at its Eltham plant in NZ.
Dairy Australia - Market News

Global Developments

GlobalDairyTrade event 110 concluded this week with the GDT Price Index down 1.2%, as most products saw average prices ease against a backdrop of increased volume projections. AMF and butter took some of the biggest hits, down 4.5% and 3.8% respectively, but remain at high levels compared to late 2013. Powder markets were relatively quiet: WMP averaged US$4,999/t (down 0.3%) with only $160/t separating the different contract periods. SMP results were mixed, but down 0.1% on average to US$4,780/t. Cheddar continued to backtrack (down 1.7% to US$4,845/t) while BMP was the only product to see an overall gain – up 3.1% to US$5,355/t. Full results available at the revamped www.globaldairytrade.info

DairyAmerica and Fonterra have confirmed they will not renew the export agreement that for the past 13 years has seen Fonterra act as DairyAmerica’s SMP export agent. From 1 August 2014, DairyAmerica intends to continue growing its market access capabilities, increasing the availability of its products internationally without Fonterra’s help, selling direct to customers.

US milk production data for January confirmed a modest increase of 0.9% in milk production for that month compared with January 2013. California, the largest state by output, shook off the sceptre of drought to post growth of 4.7%, while weather and feed issues saw Wisconsin fall by 2.9%. The US herd is estimated at just over 9.2 million cows, around 13,000 less than the same time last year and 11,000 more than its lowest point in November 2013.

Fonterra has announced further expansion works, with NZ$32m to be spent boosting sliced cheese capacity at its Eltham plant in NZ. The ‘slice-on-slice’ product is widely used in quick service restaurants and is part of Fonterra’s strategy to capitalise on rapidly growing demand for high value food service products in Australasia, Asia and the Middle East. Meanwhile, at the corporate level, Bloomberg reports that the co-operative signed NZ$2.66 billion (A$2.46bn) of loans in early February for ‘general corporate purposes’, and a further US$365m (A$408m) in AUD and NZD denominated long-term bonds this week.

The Australian Front

Bega Cheese (BGA) announced its results for the first half of financial year 2014 (H1FY14): despite seeing its milk intake slip 8% (on H1FY13) to 336m litres and farm gate prices increase ‘some 23%,’ higher dairy commodity prices and currency movements lifted revenue up 4.1% (to $510.6m) and after-tax profit up 17.9% (to $18.7m). Management highlighted the recent commissioning of an infant formula blending and canning capability at Derrimut in Melbourne’s west—pointing to continued growth in BGA’s nutritionals business. In its filing with the Australian Stock Exchange, BGA estimates that a profit of $44m. after tax and related costs on the sale of its 18.8% interest in Warrnambool Cheese & Butter (WCB) will be reflected in full-year results. Executive Chairman Barry Irvin said the company continues to see opportunity for bolt-on acquisitions ‘further down the value chain.’

Murray Goulburn (MG) also announced half-year results, along with its fourth farm gate price step-up of the season. MG’s latest step-up, 18c/kg fat and 38c/kg protein, takes the ‘weighted average available price’ to $6.53/kg MS—and the full-year ‘forecast range’ up to $6.70. The co-operative stated its milk intake for H1FY14 was up 3.7% to 1.91bn litres, while stronger ingredients prices boosted revenue up 18.3% (to $1.34bn) supporting a 17.6% increase after-tax profit ($61m). Like BGA, MG also expects to record a significant profit in its full-year results for 2014 from the sale of its WCB (17.7%) holding: $51m. after tax and related costs.

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