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Dairy Australia - Market News


21 August 2015

Dairy Australia - Market News - 21 August 2015Dairy Australia - Market News - 21 August 2015


Dairy Australia - Market News

Global Developments

After ten successive declines, the GlobalDairyTrade (GDT) auction platform produced some welcome news for sellers at its August 18th event (#146). The average price across all commodities of US$1,974/t reflected a 14.8% increase in the headline GDT Price Index, injecting some optimism into what has been a very subdued market. Whilst this event could form the basis for a turnaround in sentiment that drives a broader recovery, dairy market fundamentals remain challenging. The bulk of the price movement was for earlier months, suggesting that a number of bidders may have had short term gaps to fill. Increases for prompt delivery were particularly noticeable for SMP (up 8.5% over all periods, averaging US$1,521/t), while WMP saw more even gains, and larger ones overall, reaching an average of US$1,856/t (up 19.1%). BMP was the outlier amongst the powders, down 13.8% to an average of US$1,400/t. Butter (up 10.8%) and AMF (up 26.6%) did better, averaging US$2,541/t and US$2,724/t respectively. Results: www.globaldairytrade.info

Whilst rumours of Chinese interest may have helped GDT powder prices, some are suggesting that Russian developments may have played a role in the gains made by milkfat products. Russian authorities this week cleared 29 of Fonterra’s New Zealand plants for export, partially lifting the ban introduced in the wake of the 2013 Chlostridium botulinum scare. Russia’s Federal Service for Veterinary and Phytosanitary Surveillance (Rosselkhozadzor) announced that imports of butter, whey protein concentrate and milk protein concentrate, products which are ‘practical and in high demand, but not produced in Russia’, would be permitted from the approved facilities. Before the blanket ban was introduced in August 2013, 61 Fonterra facilities were accredited for Russian supply.

Prices are also likely to have been boosted by Fonterra’s move to prune over 56,000 tonnes of product from its GDT offer volume forecasts over the next 12 months – with over 62,000 tonnes of cuts in the next 3 months partially offset by 6,900 tonnes added back later in the season. Reduced milk production expectations, shifts to a higher value product mix, and greater off-GDT sales have all been cited as contributing factors.

The Uruguayan dairy sector is set to benefit from a recent deal to supply Venezuela with 44,000 tonnes of milk powder, and 12,000 tonnes of cheese. Depressed international returns have recently squeezed farmers in the small South American exporter, but their agriculture minister hinted that attractive premiums had been secured from Venezuela’s state-owned buyers. Shipments to Venezuela totalled around 42,000 tonnes in 2014; roughly 1/3 of total Uruguayan dairy exports by volume.

The Australian Front

Fonterra Australia has advised its farmer suppliers that it has placed its farmgate price and forecast closing price range for season 2015/16 under review. While the company is maintaining its current farmgate milk price at $5.60kg/MS, Managing Director Judith Swales said, “oversupply remains an issue, as does weak demand. Although we are less exposed to the global market in Australia, we are not immune to its volatility. ... We have updated full year commodity price forecasts to model the Australian product mix, and the outlook remains very tough.”

A Chinese dairy consortium will raise dairy heifers for export at a property near Portland. The Tianjin Bright and MengDe Dairy Group have their own quarantine facility in China, and will export the heifers from Portland. They hope to start exporting early next year, with the heifers destined for the consortium’s Chinese operations, which milk 20,000 cows. ABS figures show that during 2014/15, total exports of Australian dairy cattle fell by 20.6% (compared to 2013/14), to 73,343 head. This is largely due to a significant reduction in exports to China (down over 16,000 head), where a significant fall in domestic milk prices has dampened demand for heifers.

Local government has refused a permit for the free-standing dairy barn and milk bottling plant planned by Ningbo Dairy for Kernot in Gippsland. Ningbo had planned to expand the operation of subsidiary YoYou Dairy to 1,000 cows, producing 30,000 litres per day, and to export fresh milk to China. Council received 430 objections to the proposal during its consultation stage. They expect to have to defend the decision at the VCAT.

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