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Dairy Australia - Market News


19 May 2014

Dairy Australia - Fortnightly Update 16 May 2014Dairy Australia - Fortnightly Update 16 May 2014

GDT event 115 produced further signs that dairy commodity prices are stabilising, Fonterra’s May Global Dairy Update notes a narrowing in the gap between prices for ‘reference’ and ‘non-reference’ products, A proposed merger between European dairy giant Arla Foods and smaller cooperative EGM Walhorn is one step closer and Chobani has filed to incorporate itself in the US state of Delaware.
Dairy Australia - Market News

Global Developments

After a three week wait, GlobalDairyTrade (GDT) event 115 produced further signs that dairy commodity prices are stabilising, despite a 1.1% decrease in the GDT Price Index. Butter (up 1.6%) and AMF (up 2.4%) saw modest increases, fetching an average of US$3,892/t and US$4,170/t respectively. SMP fell 2.3% to an average of US$3,873/t in a broader market environment of intense supply competition from both northern and southern hemisphere sources. Once again WMP performed better, averaging US$3,928/t (down 1.7%). Overall, the total volume of product sold was 116% higher than the same time last year, and the weighted average price 13% lower.

Fonterra’s May Global Dairy Update notes a narrowing in the gap between prices for ‘reference’ (e.g. powders) and ‘non-reference’ (e.g. cheese) products. The disparity in returns between the different streams, and limited ability to shift production toward higher returning reference products has meant that the cooperative’s 2013/14 NZ price forecast has been held below that calculated using the Milk Price Manual. In attempting to maximize returns, production of reference products has increased 30% in Q3 this season compared to the same period last year, while nonreference products have only seen a 5% increase. Meanwhile, NZ milk collections for the 11 months to April are up 8%.

A proposed merger between European dairy giant Arla Foods and smaller cooperative EGM Walhorn is one step closer, having been approved by representative groups of both organisations’ farmer shareholders. Walhorn has around 800 farmer members in Belgium, the Netherlands and Germany which when combined with Arla’s supply base will form a cooperative comprising 13,500 suppliers in seven European countries. Pending approval by competition authorities, the merger is expected to be completed in July.

Chobani, the US-based Greek yogurt giant with operations in the UK and Australia, has filed to incorporate itself in the US state of Delaware. The move is the latest in a series of steps that analysts suggest point to an eventual IPO. Delaware is home to more than 50% of America’s publicly listed companies, including 64% of those in the Fortune 500, due to its reputation as a ‘corporate friendly’ state. Last month Chobani secured a US$750 million (AUS$800m) loan from private equity firm TPG as it pursues further expansion, but denies an IPO is on the cards.

The Australian Front

Preliminary analysis of the Federal Government’s budget announced earlier this week indicates some positives and negatives for Australia’s dairy industry. Some key items that could affect the industry include, on the plus side, support for drought-affected farmers as well as R&D funding to support farm profitability through rural-related research. Post-farm manufacturing and marketing stand to benefit from greater market access for SMEs via the export certificate registration rebate for small exporters. On the negative side, changes to programmes including Local Government financial assistance grants, Federal contributions to concessions for pensioners and senior card holders, and family payments, as well as university funding and student debt arrangements collectively may dent activity in, and resilience of, rural communities especially, as well as human capital development.

Saputo Inc.-controlled Warrnambool Cheese & Butter (WCB) announced changes to its board following a general meeting held last week. Ultimate Canadian parent company CEO and board Vice Chairman Lino A. Saputo Jr was elected WCB Chairman, replacing Terry Richardson. Saputo Inc.’s Executive Vice President of Finance and Administration, Louis-Philippe Carrière, as well as President and Chief Operating Officer, Dello Sbarba, were elected Director and Associate Director respectively. Incumbent WCB Directors Neville Fielke, Terry Richardson and Bruce Vallance were re-elected.



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