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Dairy Australia - Market News

02 June 2014

Dairy Australia - Fortnightly Update 30 May 2014Dairy Australia - Fortnightly Update 30 May 2014

GlobalDairyTrade (GDT) event 116 on 20 May concluded with a 1.8% decrease in the GDT Price Index and Fonterra and Nestlé outlined agreements ‘to realign’ their Latin American joint venture Dairy Partners Americas (DPA).
Dairy Australia - Market News

Global Developments

GlobalDairyTrade (GDT) event 116 on 20 May concluded with a 1.8% decrease in the GDT Price Index: the weighted average price for all products was US$3,873/t. The sharper fall than event 115 (down 1.1%) was surprising for many, following a month of slowing price declines. SMP (down 3.5% to average US$3,733/t) was a key culprit: outside GDT as well, SMP prices are under heavy supply-driven pressure. Butter also pushed the average lower: prices were down 3.8% to US$3,667/t. AMF bucked the trend (up 1.9% to US$4,255/t) as did rennet casein (adding 4.6% for an average of US$11,861/t). Despite a 2.6% gain for November supply, losses on early contracts saw WMP prices ease 1.1% overall for an average of US$3,877/t. Full results at

Fonterra and Nestlé this week outlined agreements ‘to realign’ their Latin American joint venture Dairy Partners Americas (DPA). Although still pending regulatory approval, key elements of the deal see Fonterra (1) taking a controlling stake (51%) in the DPA Brazil business, which will focus on chilled dairy; (2) partnering with a local entity in Venezuela to take Nestlé’s interest in the DPA business there; (3) selling its DPA powders business to Nestle; and (4) offloading the DPA Ecuador business to Nestle. The JV partners launched DPA in 2003 and also operates in Trinidad and Tobago, Paraguay and Uruguay.

The Australian Front

May 2014 Situation and Outlook: Australian raw milk production has recovered some ground after a slow start to the 2013/14 season. Favourable weather and strong farmgate milk prices for most regions have supported the recovery in southern exporting regions; milk production in northern Australia continues to struggle given particularly unfavourable seasonal conditions. At this stage, Australian milk production for 2013/14 is expected to finish between 9.1- 9.2bn litres, a modest lift from Dairy Australia’s last production estimate.

According to the latest National Dairy Farmer Survey, farmer confidence has improved significantly in most regions over the last 12 months with 75% of farmers now positive about the future of the industry, compared to a low of 43% this time last year. Farmer confidence levels across most dairy regions in Australia reflect strong farmgate pricing signals and improved seasonal conditions.

Dairy commodity prices have weakened in recent months, however, as dairy farmers around the world responded to strong farmgate price signals. Dairy Australia’s Export Region Weighted Cost and Income Indices suggest leaner dairy margins for southern export regions as commodity prices settle below recent peaks: see

Australian Dairy Farmers Cooperative (ADFC) partners with Bulla Dairy Foods (Bulla): the newcomer supplier co-op has a long-term agreement with Bulla to supply up to 120 million litres. ADFC has announced “a guaranteed flat rate opening price of $6.53 per kg/MS” and is looking to match export-focused competitors pricing. With this development, Bulla addresses some supply risk concerns while ADFC establishes further support for competitive farmgate pricing, especially in Western Victoria, as competition for milk intensifies.

Peters’ sale confirmed: Europe’s second largest ice cream manufacturer R&R Ice Cream has purchased Peters Ice Cream from Pacific Equity Partners (PEP). Peters last changed hands when acquired by PEP from Nestle in 2012 for somewhere south of $300 million. Fairfax Media suggests that R&R have paid $400-450 million for Peters and its brand portfolio, which accounts for just under 30% of the value of the $992 million retail ice cream market according to Nielsen. R&R have indicated that they intend to maintain operations at Mulgrave.

Burra steps up: Gippsland-based Burra Foods has announced its sixth step-up of the season: 8 c/kg fat and 20 c/kg protein.

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