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Dairy Australia - Market News

09 February 2015

Dairy Australia - Market News - 9 February 2015Dairy Australia - Market News - 9 February 2015

Dairy Australia - Market News

Global developments

A sharp increase in the average price of WMP translated to an emphatic 9.4% increase in the GlobalDairyTrade (GDT) Price Index this week, as event 133 marked the fourth consecutive overall price gain. The 19.2% increase (to US$2,874/t) is largely perceived to be a result of dry weather and lower farmgate prices curtailing New Zealand’s milk output this season – and sparked by Fonterra’s dramatic reduction of its own milk intake forecasts last week. The new forecast anticipates full season milk collection volumes 3.3% lower than last season, and saw forecast offer volumes on GDT slashed. Of the other volume products offered, SMP gained 6.7% to average US$2,598/t, while butter increased 6.1% to hit US$3,783/t. AMF backtracked 5.4% after several months of gains, averaging US$4,067/t. The notable exception was cheddar, losing 11.1% to average US$2,636/t. Full results at

New Zealand dairy manufacturer Synlait Milk this week announced a reduction of its farmgate milk price for the 2014/15 season from NZ$5.00/kg MS to NZ$4.40/kg MS (around $4.26/kg MS). The company cited the persistence of weak global commodity prices due to ongoing over-supply, but expects prices to strengthen ‘in the medium term’ as supply and demand re-balance. The company also warned that its interim results will be impacted by increased operating and financing costs associated with increased infant formula and nutritional production, but that the revenue from sales of these products will be reflected in its full year performance.

The weak Euro is providing some relief to European exporters, with major Dutch-based cooperative Friesland Campina increasing its February guaranteed milk price by 4% to around €30.6 cents perlitre (about $5.10/kg MS). In addition to the exchange rate helping exports of its foil cheeses, milk powders and butter, the company also cited a weaker Oceania supply outlook as a stabilising influence.

Still in Europe, the European Commission has extended its emergency Private Storage Aid (PSA) program until September in the face of calls from some member states for more aggressive intervention. The PSA program of subsidised product (typically including butter and SMP) storage usually opens from March to August to deal with Europe’s peak season, however it was activated in August 2014 in response to Russia’s embargo on dairy imports from the EU.

The Australian Front

A flurry of farmgate price announcements this week: Parmalat announced a downward revision to its projected full-season average farmgate price, down from ‘around…$6.32/kg MS;’ the company nevertheless reportedly expects to carry over its $6.09/kg MS mid season indicative price. Fonterra Australia has maintained its $5.80/kg MS farmgate price along with its forecast full-year farmgate price range of $5.80-$6/kg MS; as has Warrnambool Cheese & Butter (WCB), which is leaving its average farmgate milk price unchanged from the opening at $5.86/kg MS.

ASX-listed Bega Cheese (BGA) delivered some encouragement re its Milk Sustainability and Growth Programs, which were flagged in 2014: $25.0 million for efforts to assist environmentally sustainable practices on-farm and incentivise growth is now ‘fully allocated.’ BGA’s ASX statement indicated that the company expects its suppliers participating in approved Growth Program projects to directly invest ‘almost $50 million in their dairy farming businesses for future milk production growth.’ The growth program is targeting projects intended to deliver a 20% lift in milk supply over three years.

South Australia’s Fleurieu Milk & Yoghurt Company is reportedly working on its China strategy. Having already received the required export approvals from Australian government authorities, the Myponga-based company plans to fly fresh pasteurised milk from Edithburgh on the Yorke Peninsula into Shanghai. Currently producing up to 80,000 litres of milk a week, Fleurieu is looking at airfreighting 10,000 litres of fresh pasteurised milk weekly—with ambitions to build that volume to 40,000 litres by early calendar 2016. Marketing manager Nick Hutchinson told media that the ‘local market in SA is still…first priority [and the company]…won’t compromise local supply for exports.’ Looking to export one litre and 300ml bottles, Fleurieu joins Norco and a small but growing number of other Australian dairy companies looking to take advantage of the opportunity presented by China’s fresh pasteurised milk import market.

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