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Dairy Australia - Market News

18 September 2015

Dairy Australia - Market News 18 September 2015Dairy Australia - Market News 18 September 2015

Dairy Australia - Market News

Global Developments

Recent gains in dairy commodity prices were extended at this week’s GlobalDairyTrade (GDT) event, with a 16.5% jump in the GDT Price Index reflecting a weighted average of US$2,568/t across all products. Volumes offered remain well down (29% lower) than year-ago levels, and with the highest number of bidders since September 2014 bidding, supply and demand trends on GDT are moving in the right direction for sellers. The large volume milk powders again led this week’s gains, with WMP advancing 20.6% with an average of US$2,495/t and SMP up 17.0%, fetching US$1,992/t on average. Butter and AMF weren’t left far behind though, with prices 13.3% (averaging US$3,108/t) and 13.7% (for an average of US$3,440/t) higher, respectively. Forward curves across the key products remain relatively flat, though later month contracts (particularly March 2016) did generally post larger gains. Full results available at

Deteriorating expectations for New Zealand’s 2015/16 milk production season are providing some hope for a return to balance in global market fundamentals, amidst anecdotal reports of heavy culling in some herds. Much of the potential impact of lower milk prices and challenging seasonal conditions will be realised in the latter half of the season, when pasture growth limitations prompt a further focus on decisions around supplementary feeding, reduced-frequency milking, and culling. This has meant a wide range of production forecasts, with some analysts anticipating volumes close to the record 2014/15 season, and others tipping a fall of as much as 10%. For its part, Fonterra recently maintained its forecast of a 2-3% drop in full year New Zealand milk collections, though its statement emphasised further downside potential as the season progresses.

European stocks of SMP in intervention and Private Storage Aid schemes continue to grow, albeit at a slower rate as prices find some support. The UK’s AHDB Dairy reports that intervention purchases of SMP totalled 17,540 tonnes by early September, whilst PSA volumes remain below 30,000 tonnes. Recent rises on GDT have helped reduce the likelihood of intervention stocks ballooning, with Arla Foods selling SMP for around US$90/tonne above the intervention price equivalent at this week’s auction.

West coast New Zealand cooperative Westland Milk Products has announced a review of staff roles across the organization, in light of the current slump in dairy commodity prices. The company has indicated that some of its 520 staff are likely to face redundancies in a two stage process conducted this month, and in February 2015. Based in Hokitika, Westland also operates a site at Rolleston, Canterbury.

The Australian Front

Fonterra today officially opened their multi-million dollar stateof-the-art milk bottling plant at Cobden. The Cobden Beverages Plant began production for the Woolworths Select supermarketbrand milk range earlier this month, and will process up to 100 million litres per year for the next 10 years under the contract. Built inside the former National Foods flavoured milk plant, the multimillion dollar facility will generate over 50 jobs.

Harvey Norman have invested $34 million in dairy operator and cattle breeder Coomboona Holdings, acquiring a 49.9% stake and advancing about $9 million to the company. Coomboona own land and farm assets, including dairy farms, in northern Victoria (Goulburn Valley), in addition to operating a pedigree breeding and genetics business. It is the first time that publically listed Harvey Norman has invested in the agricultural sector, and shares fell 16c to $4.15 following the news.

According to the Dairy Farm Monitor Project Report, 2014/15 was a profitable year across all three Victorian dairy regions, with 73 out of 75 participants recording a positive return on assets and 83% a positive return on equity. Participating farms reported average earnings before interest and tax of $244,511, and a return on assets of 5.3%. The average milk price received by farmers dropped 11% (to $6.04/kg MS) compared to last year ($6.79/kg MS). The lower average milk price, higher feed costs and mixed seasonal conditions resulted in a decrease in profits from the extraordinary results of 2013/14. The project is a joint initiative between Department of Economic Development, Jobs, Transport and Resources (DEDJTR) and Dairy Australia.

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