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Dairy Australia - Market News


17 April 2015

Dairy Australia - Market News - 17 April 2015Dairy Australia - Market News - 17 April 2015


Dairy Australia - Market News

Global Developments

The GlobalDairyTrade (GDT) Price Index fell a further 3.6% at event 138 this week, with an average price of US$2,620/t across all products. This brings GDT commodity prices back on par with end-2014 levels, and 35% lower than the same time last year – even though the volume sold at the most recent event was 30% lower than the 15th April 2014 auction. SMP took the biggest hit, down 7.8% to average US$2,253/t. Interestingly, the losses were confined to May-August deliveries, with contract 5 and 6 periods (September and October delivery) gaining 4.4% and 4.9% respectively. The average price for WMP fell 4.3% to US$2,446/t; mainly through July-September (Contract 3-5), while butter was 6.6% lower with an average of US$3,026/t – and a relatively flat forward curve. There were some bright spots: AMF posted a 2.3% gain to average US$3,744/t, while GDT cheddar increased 2.7%, averaging US$2,888/t. Full results at www.globaldairytrade.info

In the United States, the USDA has again lowered its 2015 production forecast for the sixth month in a row, as margins begin to tighten. Having finished the 2014 year up 2.4%, US milk production grew by a slightly slower 1.9% for 2015 to February, and this YTD growth rate is expected to be maintained through 2015. The downgrade has been linked to dry conditions in western states, with tighter margins this year prompting many farmers to cut back on feed costs. In particular, greater exposure to depressed international markets and ongoing drought pressure have seen production drop away in California: down 3.8% for February.

Recently released data indicates that the European Commission’s Private Storage Aid (PSA) subsidised storage program continues to accept butter and SMP. The PSA program was re-opened in early September 2014 in the wake of the Russian import embargo, and has since accepted 56,587 tonnes of butter and 22,416 tonnes of SMP. Not all of this remains stored however, with 11,387 tonnes of butter and 5,691 tonnes of SMP removed since mid-February; representing a net decrease in SMP tonnages since that time. Of the product remaining stored, 53% of the butter volume originates from the Netherlands, while 40% of the SMP is German-produced. In both cases, three out of 28 EU member states account for over 80% of total tonnage.

The Australian Front

Murray Goulburn Co-operative (MG) this week issued the Notice of Meeting for an Extraordinary General Meeting (EGM) to vote on a new capital structure. The proposal (subject to shareholder approval) would allow MG to seek approximately $500 million of capital, the majority of which will be raised through the Initial Public Offering (IPO) of a Unit Trust to be listed on ASX. Unitholders will have an economic exposure to MG’s business but will not have voting rights in relation to MG or its operations. The Australian reports that the proceeds will be spent on three projects, including $260-$300 million to allow production of higher margin infant formulas at MG’s Koroit facility, $165-$190 million for a new fully automated UHT beverage plant, and $125-$145 million for their Cobram plant to take bulk cheese into consumer and food service.

An initial consignment of South Australian Dairy Farmers (SADA)-created fresh milk brand SADA Fresh has landed in China; part of the group’s plan to extend the brand’s reach outside its home state. The organisation plans to fly 4,000 litres of the packaged product to China each week for the first three months, with a view to subsequently doubling the order ‘depending on demand’. SADA Fresh is processed by Parmalat, with SA sales (via Coles) contributing 20 c/L to the South Australian Dairy Industry Fund. Sold under a separate contract, the China-bound product will contribute 5c/L to the fund.

Work is reportedly about to start on a full feasibility study regarding proposed co-operative BigCow Tasmania. The initial proposal floated by KPMG at the 2014 TasInvest Summit was for a $1.1 billion dollar project, with 160,000 head of cattle, and a $215 million processing plant for milk powder production for the Chinese market. An “information memorandum” for use in raising seed funding for the full feasibility study is currently being developed. Four to five different types of shares would be offered for co-operative members, with $50,000 parcels of shares offered to prospective investors.

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