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Dairy Australia - Market News

30 June 2014

Dairy Australia - Fortnightly Update 27 June 2014Dairy Australia - Fortnightly Update 27 June 2014

The GlobalDairyTrade (GDT) broke an eight-event series of overall declines, US production for the month of May fell just short of 8.2 billion litres according to the latest USDA data and growth and investment continues to be the theme of major European processors.
Dairy Australia - Market News

Global Developments

A long-awaited positive move in the GlobalDairyTrade (GDT) Price Index characterised trading event 118 last week, breaking an eight-event series of overall declines. A seasonally low 31,000 tonnes (7,000 than last auction) of product sold for a weighted average of US$3,807/t. Though small, the 0.9% average increase could generate interest from buyers who have avoided forward purchases as prices have eased. Results were mixed across the product spectrum, with WMP recovering 2.4% after recent falls to reach US$3,658/t. SMP was broadly steady, averaging US$3,855/t (down 0.2%) while AMF lost 3.8% overall to average US$3,898/t. Butter prices firmed 1.8% on average (to US$3,699/t). The outcome of the next event will be watched carefully in light of the significant near-term pressures associated with buoyant milk production and slower Chinese demand. Full results at

US production for the month of May fell just short of 8.2 billion litres according to the latest USDA data: an increase of 1.4% on the same month, prior year. Year-to-date growth remains just over 1%, against a forecast full year expansion of 2.4%. Reports suggest southern states are starting to feel the pinch from hot and dry summer conditions, while those further north are enjoying good fodder harvests and ramping up expansion activity that was stymied through the difficult 2013/14 winter.

Growth and investment continues to be the theme of major European processors. Eversvinkel-based Deutsches Milch Kontor (DMK), Germany’s largest co-operative, is targeting growth in the two ‘key’ areas of infant milk formula (IMF) and ice cream; increasing its milk collections by 3% to nearly 7 billion litres last year, from 9,400 members; compatriot Molkerei Ammerland, based in Northern Germany, is increasing warehouse capacity and building a new powder dryer.

The Australian Front

Fonterra Australia has announced its opening farmgate prices for the 2014/15 season of $5.80 kg/MS and a forecast full-season price range of $6.10-$6.30 kg/MS. Fonterra just recently unveiled a new line-up of innovative farmgate pricing schemes for its Australian suppliers.

Murray Goulburn (MG) has ratcheted up the competition for milk further with its Southern Milk Region opening price for 2014/15, 7% up on the prior season’s and purportedly the highest on record: an ‘average available opening price of $6.00 kg/MS’, with a forecast full-season price range of $6.15-$6.30 kg/MS; and in the NSW-Sydney Milk Region, the co-op’s recently established domestic-focused northern supply pool, an ‘average available opening price of 54.2 c/l.’ At face value, the narrow gap between MG’s opening price and full-season range implies a lower number of step-ups than seen in recent seasons; regardless, the co-op’s announced full-season range, like its competitors’, carries the obligatory caveats: dairy commodity price as well as exchange rate movements could affect the final farmgate price outcome.

Warrnambool Cheese & Butter (WCB) added to the flurry of season 2014/15 price announcements with an ‘opening average milk price of $5.86 per kilogram milk solids....equal to [its] highest ever opening milk price.’ WCB also flagged that it believed its full-season price may exceed $6.20 kg/MS.

Further north, Lion has flagged a significant farmgate price increase for its Far North Queensland Dairy Farmer Milk Co-operative (DFMC) suppliers ‘taking its weighted price to 59.3 c/l;’ Lion has also increased farmgate prices for its southeast Queensland and NSW suppliers with an approximate 1 c/l rise taking the weighted price in those regions to 57cpl and 53.8cpl.

Across the country, Parmalat (Harvey Fresh) according to The Western Australian is taking steps to incentivise milk supply in Western Australia from January through May by paying suppliers a reported premium of close to 65% above the average price per litre. Parmalat’s Harvey Fresh expects to boost its supply by up to 40 million litres through the incentives paid on 3-year supply agreements and a 2 c/l increase in the current season’s base milk price.

China Investment Corporation (CIC) is reportedly looking at taking a 49% stake in 9,000 ha property Rushy Lagoon in northeast Tasmania. The deal would enable expansion of irrigation and the 2,800 cow herd.

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