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Dairy Australia - Market News


10 July 2015

Dairy Australia - Market News 10 July 2015Dairy Australia - Market News 10 July 2015


Dairy Australia - Market News

Global Developments

Sellers of WMP received an abrupt jolt from last week’s GlobalDairyTrade (GDT) results, with WMP prices tumbling 10.8% to an average of US$2,054/t. Contracts through the southern hemisphere spring were hardest hit as offer volumes ramped up to cover the peak production period. In contrast to other recent events, the forward curve is beginning to show signs of an expected recovery, with a $200/t premium for December, vs spot deliveries. However, further declines in NZX futures markets since the auction suggest seasonal volume increases are likely to weigh on upcoming auctions. Results for other products were mixed, with SMP losing 5.8% to average US$1,875/t, and fat products showing signs of stability (butter down 0.3% to US$2,694/t and AMF recovering 1.6% to average US$2,855/t). Overall, the GDT Price Index fell 5.9%, with the average price across all periods easing to US$2,276/t – the lowest since July 2009. See full results at: www.globaldairytrade.info

The supply pressure helping depress commodity prices is unlikely to ease in the short term, with milk production still booming in key dairy export regions. After months of speculation and widely differing forecasts amongst industry players, official Dairy Companies Association of New Zealand (DCANZ) data shows New Zealand’s milk production increased 2.8% for the full 2014/15 season (ending May 2015). A brief slowdown during February and March 2015 as drought conditions hit parts of the South Island was partly offset by a stronger finish through April and May. Favourable autumn conditions, particularly across the North Island, also helped offset the effects of early dry-off and culling in other areas.

A consortium of Russian and Chinese investors are building what is reported to be the world’s largest dairy farm, intended to house 100,000 cows. Situated near Mudanjing City in northeast China, the operation will supply milk and cheese to neighbouring Russia, with feed to be supplied from 100,000 hectares of land across both countries. It forms part of a strategy to meet Russia’s dairy needs from alternative sources to the EU, US, Australia, Canada and Norway – banned under Russia’s food import embargo, which now extends to August 2016.

The Australian Front

The past fortnight has seen several additional opening milk price announcements for the 2015/16 season. Both Warrnambool Cheese and Butter and Fonterra Australia opened at $5.60kg/MS. Fonterra are forecasting a season closing range of $5.80 – $6.00, on the basis of an anticipated recovery in global prices in the first half of 2016 and the continued softening of the AUD. Parmalat announced $5.64kg/MS, while subsidiary Longwarry Food Park suppliers will receive $5.20kg/MS. Australian Dairy Farmers Cooperative, with partner Bulla Dairy Foods, have announced an average opening price (including incentives) of $5.87kg/MS. Dairy Farmers Milk Cooperative have announced that their variable price should provide southern suppliers with an average total of $5.80kg/MS; varying between regions, up to $8.17kg/MS for FNQ.

Murray Goulburn (MG) last week (3rd July) successfully completed the implementation of its new capital structure, with the listing of the MG Unit Trust on the ASX. The initial public offering attracted in excess of 6000 new Australian and international investors, at both the retail and institutional level. The initial listing price was $2.10; shares rose to $2.42 on Monday, and have traded slightly above $2.30 since.

The Agricultural Competitiveness White Paper was released last Saturday, outlining the Federal Government’s overarching policy for the agriculture sector. The paper reflects many of the key recommendations made by the dairy industry. Highlights include an additional $100 million for the Rural R&D for Profit program; $30.8 million to break down technical barriers to international trade, including through the appointment of five new ag counsellors in key markets; $11.4 million toward boosting ACCC engagement with agriculture, including an ACCC Agriculture Commissioner; the decision to enable farmers to double their Farm Management Deposits (FMDs) to $800,000 and use FMDs as a loan offset to reduce interest costs; and $200 million to improve biosecurity surveillance and analysis nationally.

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