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Dairy Australia - Market News

20 March 2015

Dairy Australia - Market News - 20 March 2015Dairy Australia - Market News - 20 March 2015

Dairy Australia - Market News

Global Developments

A sharp reversal characterised the GlobalDairyTrade (GDT) auction platform this week, as the GDT Price index ended the event 8.8% lower on a weighted average price of US$3,136/t. Fonterra’s addition of volumes back onto GDT forecasts, together with supply-driven market weakness out of Europe and the US have all weighed on sentiment in recent weeks. The GDT drop was also foreshadowed by NZX futures market, which saw steep losses following recent rains in New Zealand. All products were affected, with WMP taking the biggest hit of the large-volume categories; down 9.6% to US$2,928/t. SMP was less impacted, losing 5.5% on average to hit US$2,731/t – with the biggest losses felt by European sellers. Butter and AMF corrected downwards 9.4% (to US$3,555/t) and 8.4% (to US$3,877/t) respectively, while cheddar dropped 7.4% to US$3,130/t after a 10.8% bounce last auction. Full results at

Authorities in New Zealand last week revealed a threat to contaminate consumer-ready infant formula with 1080, a product widely used in that country for possum control. Months of testing to date have not produced any evidence of product tampering, however New Zealand police and the country’s Ministry of Primary Industries continue to treat the threat seriously. A criminal investigation is underway. Apart from extra testing requirements and some reported sales impact, the issue has generated a notably measured response in China – with some suggesting that the kiwis have effectively applied the lessons of other recent contamination scares.

Dairy exports from the United States are in their biggest slump since 2012, according to the most recent outlook report from the US Dairy Export Council (USDEC). The report draws upon data to January, confirming that US sales to China, Southeast Asia and the Middle East/North Africa (MENA) are at four-year lows (down 40%, 53% and 75% in US dollar terms for January itself). Mexico, South Korea and South America have seen an increased focus, with the value of product directed to the latter two increasing 23% and 27% respectively. On a total milk solids basis, US exports equated to 11.2% of national milk production in January; down from an average of 15.4% in 2014. While firm domestic markets and a stronger currency created pricing headwinds for US exporters, congestion at West Coast ports due to industrial action also contributed to the slowdown.

The Australian Front

Warrnambool Cheese and Butter have announced a step up of $0.08 per kg fat and $0.20 per kg protein, taking their 2014/15 ‘weighted-average milk price’ to $6.00/kg MS. The review comes ahead of time, having been scheduled for April. “We have reviewed our milk price sooner than planned as trading conditions have become clearer since our January review and we are committed to ensuring that favourable price movements are passed through to you earlier whenever possible,” said CEO David Lord. WCB will review their milk price again in June. The Woolworths Farmers’ Own milk range has been extended to 194 southern Queensland stores, as far north as Rockhampton. The milk used for the Farmers’ Own brand is purchased directly from farmers by Woolworths, rather than through a processor, and is already available in NSW (from Manning Valley farms), WA (Margaret River farms) and Victoria (Otways farms). Woolworths are seeking to extend the range into Far North Queensland, and that they are looking for a farmer and processor in the area.

Fonterra Co-operative Group Ltd. confirmed on Monday that it had completed the partial tender offer announced last August for Beingmate Baby & Child Food Company Ltd., and would acquire 18.8% of the Chinese infant formula manufacturer. The companies are planning to create a fully integrated global supply chain via a joint venture. The chain will extend from Fonterra’s milk suppliers, through to Beingmate exclusively distributing Fonterra’s Anmum™ infant formula in mainland China. Fonterra manufacturing sites in New Zealand, Australia, and Europe will be utilised, and the joint venture will include the purchase of the Australian Darnum plant.

Parmalat have released their 2014 draft financial statement, showing an increase in net revenue for their Australian division of 2.1%, and an EBITDA decrease of 30.9% compared with 2013 (if a constant exchange rate year-to-year is assumed). A combination of high farmgate milk prices and week dairy commodity markets were the main contributing factors.

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