Financial stress could lead to lower milk output in Australia [News Oceania n°12/2016]

Period: May 31 – June 10, 2016

AUSTRALIA

• Milk production: in seasonal decline. April milk production was 2.7% below April 2015.
• Weather situation: rainfall below average for this season. Weather persists in being more hot and dry than expected.
• Milk producers: dry conditions further constrained pasture growth, which tightened markets for hay. It has also led to unexpectedly higher costs to dairy producers for irrigation and grain.

NEW ZEALAND

• Milk production: the production season is nearing an end.
• Milk producers: are culling more cows than expected, as they strive to adapt to lower returns. A large processor in New Zealand has recently announced opening prices for the 2016-17 season, lower than many producers had hoped for. Awareness that opening prices for the current season were reduced lower through the season causes concerns as to where the newly announced pricing for the next season will ultimately rest as that season progresses.

MILK PRODUCTION

• Australia *: -1.15% (Jul 15 – Apr 16 vs. Jul 14 – Apr 15)
• New Zealand *: -1.77% (Jun 15 – Apr 16 vs. Jun 14 – Apr 15)

BUTTER (82%): prices increased slightly, due to strong demand for orders as well as price strength in futures trading. The declining milk production volumes have also been accompanied by lower butterfat content.

CHEDDAR CHEESE: prices increased. Less milk is available to make cheese. It is believed that cheese production has declined which has given slight strength to prices.

SMP: prices increased. With the end in the EU of fixed price intervention and the beginning of the new program utilizing a tender system, expectations that increased SMP pricing may result has joined an increasing consensus that Oceania SMP pricing should move up closer to levels in the EU.

WMP: prices increased slightly. WMP is viewed as the most significant dairy export from New Zealand. The priority given to WMP production contribute to constancy in output.

In Australia there are concerns that the financial stresses of the current dairy season will result in producer adjustments that will result in lower milk output for the coming 2016-17 milk season.

Recent efforts to enhance dairy manufacturing capacity in New Zealand to switch more quickly between powders and cream products, is now being bolstered by addition of a cream group to GlobalDairyTrade products.

CLAL.it – SMP prices in Oceania, United States and Germany

Note: · Assessments about market trend are expressed in US$; · * Dairy season: July, 1st – June, 30th (Australia), June, 1st – May, 31st (New Zealand).

Source: USDA summarized by the CLAL Team

More informations about milk production in New Zealand and Australia are available on CLAL.it