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Dairy Australia - Market News


07 August 2015

Dairy Australia - Market News - 7 August 2015Dairy Australia - Market News - 7 August 2015


Dairy Australia - Market News

Global Developments

There was little respite for sellers at the latest GlobalDairyTrade (GDT) auction (event 145) this week. A weighted average price of US$1,815/t across all commodities saw the headline index fall a further 9.3%. Only cheddar (up 0.2% to US$2,663/t) and lactose (steady at $535/t) held ground, as the major product lines saw heavy falls. 142 out of 152 participating bidders secured product; the total volume of 46,527 tonnes sold was 47% up on the previous event, and just 4% shy of the same time last year. SMP was worst hit as volumes begin to move into intervention in Europe: down 14.4% to an average of US$1,419/t. WMP fared little better, averaging US$1,590/t (down 10.3%) with February 2016 contracts offering little relief at US$1,707/t. Butter eased 6.1% (averaging US$2,293/t) with a flat forward curve. Later delivery AMF pricing hints at some medium term upside, but not this week: the overall average was down 11.7% to US$2,253/t. Full details available at www.globaldairytrade.info

Following the GDT auction, many were expecting today’s announcement by Fonterra that they would cut the 2015/16 Forecast Farmgate Milk Price for their New Zealand suppliers. The revised forecast has been released at NZ$3.85 /kgMS, with a forecast earnings per share range of 40 – 50c. They also announced Fonterra Co-operative Support of an additional 50c per shared-up kgMS. Chairman John Wilson said the reduced forecast was due to the continued significant imbalance in the global dairy market, with weak demand and surplus supply.

TPP negotiations failed to arrive at a final resolution last week. After more than five years of negotiation it was hoped that high level talks in Hawaii would finalise the agreement, which would cover around 40% of the global economy. According to Federal Trade Minister Andrew Robb, Australia made significant gains across a number of areas, including agricultural market access. However, dairy and sugar remain problematic, along with other sticking points such as cars and pharmaceuticals. Canada is one of the countries being called on to reduce protectionist measures around their dairy industry. A report recently commissioned by their largest dairy co-operative, Agropur, found that 4,500 to 6,000 farms would not be able to cover their cash costs if supply management were simply eliminated, putting 40% of Canadian milk production at risk.

Further detail has been released on the flagged extension to public intervention and Private Storage Aid (PSA) for butter and SMP. European Agriculture Commissioner Phil Hogan has announced that the extension will run until February 29th 2016.

The Australian Front

Australian Fresh Milk Holdings (AFMH) have completed the purchase of Moxey Farms, one of Australia’s largest single-site dairy operations. The Moxey family have acquired a strategic stake in AFMH as part of the deal, and will stay on to operate the farming business in a joint venture with the Perich family (owners of consortium member Leppington Pastoral). The other consortium members - Freedom Foods Group and New Hope Dairy Holdings – offer opportunities to leverage processing capabilities and Asian market connections.

Brownes Dairy is going on the market, according to the Australian Financial Review. The newspaper reported last week that owner Archer Capital has hired Luminis Partners to sell the WA milk and yoghurt manufacturer. Archer reportedly hired Luminis after receiving inbound approaches, and a sale process is expected to be “up and running within weeks.” According to the AFR, the business is understood to be making more than $15 million in EBITDA, which could indicate a sale price of $130 to $150 million.

Beston Global Food Company (BFC) – set to float on the ASX this month - has signed a distribution deal with Chinese retail giant Dashang Group. Dashang reported revenues of over AUD$40 billion in 2014 through shopping centres in 150 Chinese cities, including its own supermarkets and high-end gourmet specialty stores. They will distributed Beston’s dairy, meat, seafood and health food products, and subscribe to 14.9% of Beston’s stock as part of the IPO.

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