- news, features, articles and disease information for the dairy industry

Dairy Australia - Market News

28 July 2015

Dairy Australia - Market News - 28 July 2015Dairy Australia - Market News - 28 July 2015

Dairy Australia - Market News

Global Developments

GlobalDairyTrade (GDT) event 144 emphasised the ongoing downside risk facing international dairy prices, with the headline GDT Price Index down 10.7%, for an average price of US$2,082/t. In contrast to recent auctions, all major products were affected, as previous signs of stability were swept aside. Butter prices fell 9.5% and AMF 10.6% (averaging US$2,621/t and US$2,460/t respectively); the latter taking a much more significant hit in early month contracts. SMP lost a further 10.1% (averaging US$1,702/t), amidst reports from Europe that suppliers are accepting significant discounts below the intervention price in order to secure prompt sales and payment. After a significant decline last auction, WMP took a further 13.1% hit, with the average price of US$1,848/t prompting a number of New Zealand market analysts to lower their 2015/16 farmgate price guidance. Of the 84 product and contract combinations offered, 35 failed to exceed their starting price, which, based on typical pricing practice, implies a fall of more than 15%. While the economic signal to reduce production will be increasingly difficult to ignore, the short term may well see further falls as powder volumes continue to ramp up over the next few auctions. Full results at

Sharp falls on GDT have hit milk price expectations for New Zealand farmers, with banks and market analysts pruning milk price forecasts heavily in the wake of the latest auction. ANZ bank downgraded its forecast for Fonterra’s price to a range of NZ$3.75-$4.00/kg MS (around A$3.71-$3.96/kg MS), while BNZ is tipping NZ$3.80/kg MS. Fonterra’s current forecast sits at NZ$5.25/kg MS (A$5.19), and will likely be reviewed at its August 7 th board meeting. Rival processor Open Country Dairy this week cut its milk price guidance from NZ$4.75-$4.95 to NZ$3.65- $3.95/kg MS (A$3.61-$3.91). Kiwi farmers are already feeling the pressure, with unconfirmed media reports suggesting at least one bank has cut off credit for its most heavily leveraged clients.

Meanwhile, Fonterra has announced 523 redundancies across its ‘central procurement, finance, information service, human resource, strategy and legal teams’, in an attempt to help the group ‘remain competitive’, improve profitability, and ‘deliver value’. An unspecified number of the redundancies will be from Fonterra’s Australian operations.

European Agriculture Commissioner Phil Hogan has announced an extension of the window for intervention buying and Private Storage Aid (PSA) for butter and cheese. The length of the extension beyond the current September 30 deadline has not been flagged. A joint Polish/Czech proposal to increase intervention prices has been ruled out, however.

The Australian Front

Parmalat has retained the Woolworths private label milk contract in New South Wales, signing a five year deal (as opposed to its current two year contract) worth a reported $100 million. In addition, the company won the Woolworths contract in South Australia, at the expense of Lion, which has nonetheless retained its Tasmanian agreement. Fonterra has the Woolworths contract in Victoria, and Brownes the WA equivalent.

Dual ASX/NZX-listed milk A2 Milk Company has provided an update regarding the expression of interest (EOI) to acquire all shares in the company that it revealed on June 22nd. The company has stated that its board does not consider the joint Freedom Foods/Dean Foods EOI ‘compelling’, but that it remains open to further discussions, subject to customary ‘confidentiality and related undertakings’. It has also noted receipt of other ‘confidential enquiries indicating potential interest in the company’, which are currently being evaluated. However, the A2 board maintains that no takeover offer is imminent.

In other ASX news, Beston Global Food Company has lodged a prospectus for an Initial Public Offering (IPO) to be completed from July 21st to August 11th. Beston is looking to raise between $100 million and $130 million at 35 cents per share, with the company forecasting a net profit of $10 million from $70 million in revenue over 2015/16. Beston’s dairy interests cover a number of dairy farms in South Australia, as well as the recently-acquired exUDP factories at Murray Bridge and Jervois, and a stake in niche processor Paris Creek.

DOWNLOAD REPORT:- Download this report here


Seasonal Picks

Managing Pig Health: A Reference for the Farm - 2nd Edition