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Dairy Australia - Market News


15 May 2015

Dairy Australia - Market News - 15 May 2015Dairy Australia - Market News - 15 May 2015


Dairy Australia - Market News

Global Developments

Dairy commodity prices on the GlobalDairyTrade (GDT) platform eased a further 3.6% on average at last week’s auction (event 139), bringing the weighted average price to US$2,515/t. As with the previous event, results were mixed at the product level and of the major products, SMP was again the hardest hit – down 7.5% to an average of US$2,048/t. Contract 1 and 2 sales from European sellers (Arla, given Euroserum has been absent from GDT since October 2014) stayed within the US$1,900-2,000/t mark, while Fonterra’s medium heat Contract 2 SMP hit US$2,100/t. Having lost 25% over three auctions from early March, WMP prices tapered slightly, but ended 1.8% down for an average of US$2,386/t. It was a similar story with butter; a relatively gentle 0.8% fall producing an average of US$3,005/t. AMF continued its volatile run, dropping 6.3% (to US$3,505/t) after a 2.3% increase at the previous event. Buyer expectations of a substantial price recovery appear to have waned, with a relatively flat forward curve prevailing across most contract spreads. See full results at www.globaldairytrade.info

China’s Shanghai Pengxin group has agreed to purchase a further ten New Zealand dairy farms, subject to Overseas Investment Office approval. The Northland properties total 3,000 hectares of freehold, plus 300ha leasehold, and currently run 3,900 cows. The purchases were made through the associated company Dakang New Zealand Farm Group, into which Shanghai Pengxin intends to transfer the 16 ex-Crafar dairy farms it bought in 2012, and through which it is also awaiting approval for the purchase of a further two major properties in the central North Island.

Vietnamese giant Vinamilk is reportedly poised to acquire an as-yet unspecified European dairy facility, according to recent comments made by the company’s CEO Mai Kieu Lien. Vinamilk has been busy investing overseas over the past 18 months, having accumulated a 51% stake in Cambodian processor Angkor Dairy Products, a 70% stake in Californian processor Driftwood Dairy, and 19.3% of New Zealand’s Miraka Limited. It has budgeted US$186m (A$229m) for both organic and M&A-linked growth over the course of 2015.

The Australian Front

Shareholders voted in favour of all items of business presented at the Murray Goulburn Extraordinary General Meeting of shareholders last Friday. Items presented included the new capital structure and related constitutional amendments, the consolidation and conversion of B and C Class Preference Shares to non-voting Ordinary Shares, and an increase in the aggregate Director fee pool. The approval of the new capital structure clears the way for MG to seek to raise $500 million in new capital.

Midfield Group plans for a milk powder plant and enlarged cold storage facility in Warrnambool received parliamentary approval this week. The factory will not be built until the milk powder plant already planned for Penola is operating: while this plant is reportedly awaiting permits, it is expected to be operational in July 2016, starting with 160 million litres per year. The two plants bring Midfield’s planned dairy manufacturing investment to around $130 million.

The Bureau of Meteorology raised the ENSO (El Niño - Southern Oscillation) Tracker to El Niño status on Tuesday, and international climate models suggest that threshold levels are likely to be exceeded until at least spring. El Niño is expected to dominate the Australian climate during the second half of 2015: a typical weather pattern would see southern Australia experience above-average daytime temperatures, with below average winter and spring rainfall over the east of the country. At present, the climate is dominated by a warmer than usual Indian Ocean, and consequently the May to July outlook is wetter than average for much of Australia.

Milk production would double for ASX listed Australian Dairy Farm Group under a plan to purchase another three farms in south-west Victoria. The company already owns four farms, and has entered into conditional agreements for the additional three, trying to raise up to $17.7 million for the purchases. Reportedly, $15.7 million has already been raised from institutional and retail investors, 40% being from overseas.

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