TheDairySite.com - news, features, articles and disease information for the dairy industry

Dairy Australia - Market News


20 February 2015

Dairy Australia - Market News - 20 February 2015Dairy Australia - Market News - 20 February 2015


Dairy Australia - Market News

Global Developments

An official ‘adverse event’ declaration for half of New Zealand’s South Island, together with a sharp reduction in offer volumes
helped propel the GlobalDairyTrade (GDT) price index to a further 10.1% increase at event 134 this week. Actual and anticipated New Zealand supply pressure was especially reflected in the results for WMP, up 13.7% to US$3,272/t. SMP continue to gain ground, albeit at a slower pace – rising 5.7% to average US$2,744/t. AMF more than made up for last auction’s losses (up 6.4% to US$4,314/t) while butter averaged US$3,823/t, an increase of 1.1%. At just under 23,000 tonnes (down 18% on event 133), the total volume of product was the lowest since May 2013, sold for an average of US$3,366 – the highest in seven months.

Following the auction, Fonterra chairman John Wilson told a Federated Farmers meeting in Taupo that the current price point is
about that needed to hit the cooperative’s current NZ$4.70/kg MS farmgate milk price forecast. The forecast is due for update next week. As reported in the previous Fortnightly Update, farmgate milk prices in parts of the EU are beginning to stabilise, taking their cue from steadier commodity markets. Without the benefit of a softer Euro however, dairy farmers in the UK continue to feel the heat from a stillshaky market: Muller Wiseman and Dairy Crest announcing further price reductions from March. Dairy Crest coupled its announcement with a pledge to maintain its farmgate price at a minimum of the current level until July, ‘allowing farmers to plan ahead…through the peak period of milk production’.

Despite challenging market conditions, UK farmers remain optimistic about the long term future of the industry, according to a
survey carried out by industry organisation DairyCo. Despite an oversupply of milk taking the blame for this year’s price falls, 92% of those surveyed indicated intentions to either maintain or increase production in the next two years.

Having flagged an expansion to its Singapore infant formula production base in September, Mead Johnson has announced
further plans to increase capacity to serve growing demand in Asia. Announcements this week targeted facilities in the Netherlands and US, with the company intending to ‘build a more flexible business’ to cater for growing sales through e-commerce channels in China.

The Australian Front

Several companies accounted half-yearly results in recent weeks: Bega’s announcement to the ASX captured the gist of things this season, highlighting the longer-term positive outlook against some of the ‘short-term challenges.’ The latter included international commodity prices around 50% down on the prior year’s elevated levels denting the contribution to earnings from Tatura; the former reflected via costs incurred in establishing the Derrimut canning facility and the company’s Sustainability and Growth programmes aimed at boosting milk supply. Bega reduced previous guidance for fullyear result from ‘in line with the FY14 result of $29.7 million’ down to a $25-28 million range. More domestically-focused Lion meanwhile highlighted that while ‘conditions remain challenging [the company has] made a fast start implementing [its] three year turnaround strategy.’

Elements of Lion’s renewed focus in Dairy are revised farmgate pricing offers, a focus on higher value milk specialty cheeses,
milk-based beverages and yoghurts and the establishment of a new unit, ‘Lion Asia Dairy’ to grow Lion’s brands in China and
other key Asian markets. Lion Asia Dairy reportedly launched its Dairy Farmers brand in major Chinese retailer China
Resources Vanguard ‘with plans for significant expansion across southern and eastern China.’

Fonterra received required local planning approval to proceed with previously announced plant expansion at Cobden. The NZ co-op’s Australian unit is spending a reported $31 million on expanding its existing facility and installing tanks that will be used for Woolworths’ private label fresh milk. 

Fonterra has a 10-year supply agreement with Woolworths and expects to have the plant operational in the coming months.
Another Woolworths supplier, Camperdown Dairy is set to export yoghurt to China from April. Camperdown Dairy CEO Peter Skene told local media that the company will be exporting around four tonnes of yoghurt (in 200 gram cups) a week to Shanghai supermarkets. CamperdownDairy (notto be confused with Camperdown Dairy International, which is redeveloping its part of the former Bonlac site at Camperdown) was born out of the Aussie Farmers Direct dairy business and still supplies the online shopping service.

DOWNLOAD REPORT:- Download this report here

Our Sponsors

Partners


Seasonal Picks

British Field Crops 2nd edition