Monday, 09 January 2017 15:47

Moderate gains as outlook lifts

Written by  Steve Spencer, Fresh Agenda

GLOBAL dairy market analysts Freshagenda have released their latest forecast for 2016/17 and 2017/18 farmgate milk prices in southern Australia, and say the news is positive for farmers.

The current season 2016/17 farmgate milk price paid by dairy product manufacturers is tipped to range between $5.00 to $5.40/kgMS.

The outlook has improved over the season, Freshagenda’s previous forecast was a range of $4.80 to $5.20/kgMS.

The updated forecast reflects the net effects of:

  • Higher global commodity product prices, helped by worse-than-expected milk output from major European producers, and recently led up by a surge in GDT prices for WMP which has lifted spot and other reference prices;
  • Strong cheese demand in developing markets;
  • A sharp fall in Australian milk production which will increase manufacturing conversion costs;
  • Continuing tight margins in local grocery markets for cheese; and
  • A lower full year estimate for the value of the Australian dollar of $US0.74 with the return to positive interest rates in the US and prospects for weaker metal commodity prices in 2017.

For the 2017/18 season, further significant improvement is expected as the strong lifts in product spot values are locked into export and wholesale prices, giving a forecast range milk price between $5.90 to $6.30/kgMS.

The drop in global milk output will start to reverse in mid-2017 but take some time to impact product values.

Freshagenda director Steve Spencer says the forecast has been developed and updated to provide dairy farmers and other industry stakeholders with improved pricing transparency and an input to planning.

“There has been a lot of industry discussion since the events of April last year about the need for improved information on future directions in farmgate milk prices. We have had a lot of farmers tell us they would welcome clearer and more timely information on the market outlook and what it means for them on farm.”

Freshagenda’s forecast is based on its extensive Global Dairy Directions analysis, a commercial product provided to dairy companies, ingredient buyers and traders in Australia, New Zealand, Europe, Asia and the US.

This provides a unique platform to project international commodity values, which are then converted into an average farmgate milk prices based on relevant product mix and exchange rate assumptions.

“Our analysis is independent of the dairy companies. It is based on global dairy market fundamentals and our deep understanding of local industry dynamics. We feel this independence is important in the current environment, as there has been damage done to the trust farmers have in price announcements of major companies.” Mr Spencer said.

“While our analysis provides an indicative forecast for prices, the results achieved by individual companies will vary based on company product mix, exposures to global and domestic markets and the ability of different business models to capture higher value above commodity returns.”

An explanatory note outlines the outlook and the factors affecting the improved market settings for dairy farmers. (Source: Fresh Agenda)

More like this

While the industry makes headlines, the market turns

We're getting close to the peak of the production season in southern Australia, in one of the most tumultuous periods in the recent history of the industry. In the past 18 months, an unprecedented volume of milk has moved between major dairy companies in a short space of time, and most likely has some way to go yet, as the aftershocks of the major step-down in milk prices towards the end of the 2015-16 season continue to reverberate.

Australia caught in game of currency roulette

While the world market for dairy products is in much better shape going into the 2017/18 southern production season, there are still a few risks that may weaken milk prices for Southern Australian dairy farmers.

Poor policy delivers a butter spike

It’s strange times for the global dairy market, and one of the crazier things we’re seeing is how the butterfat market has performed lately. 

Keep it simple, farmers tell processors

Dairy farmers want simpler payment systems and more market intelligence from their suppliers, according to a survey commissioned by the Union Dairy Company and co-funded by the South Australia Dairy Industry Fund.

We need to talk about cheese

There’s always a lot of local media coverage about the price of milk and how it’s hurting farmers. When global dairy trade is discussed it’s all about whole and skim milk powder.

More from this category

Fonterra taps into Chinese ‘consuming class’

THE SCENE: downtown Beijing.

Beside a bus stop in a cluster of ordinary local shops is a bakery called Wei Duo Mei, open 6.30am to 9.30pm, seven days a week.

To Australians a bakery is no big deal, but to China’s rapidly increasing ‘consuming class’, or new wealthy, the bakery is something special, an opportunity Fonterra has been quick to exploit.

New Fonterra China farm taking shape

 

EARTHWORKS HAVE started on Fonterra’s new $42 million dairy farm in Yutian County near Beijing.

Project manager Kim Mashlan told Dairy News Australia the perimeter fence is complete and other work is in progress. But during the three months of winter progress will be limited.

A2 builds Sydney plant

A2 Corporation plans to build a $10 million processing plant in Australia after receiving $4 million via a share placement.

Domestic consumption rises

The past decade has seen many changes in the Australian dairy industry and none more significant than in the way milk is used in the various states of Australia.

Making money from acid whey waste

BOOSTING VALUE from whey could earn Australia’s dairy industry millions and improve sustainability, says the winner of a big industry prize. 

The recent move by Coles to slash private label milk prices to $1 per litre has caused a huge stir in dairy circles during the past month.

AS THE current season draws to a close, many farmers in southern Australia will be turning their thoughts toward the 2011/12 season and the opening price announcement.

ONE OF Australia's oldest and largest dairy companies is tipping increased financial strength for shareholders and more development opportunities after it is publicly listed on the Australian Stock Exchange in July.

AS ANOTHER season draws to a close; milk prices come 'top of mind' as farmers assess how they've ended the year and put together operating plans and budgets for next season.

Exasperation at years of low milk prices drove South Australian dairy farmers Barry Clarke and Geoff Hutchinson to take charge of their own destiny.

Leave a comment

Make sure you enter the (*) required information where indicated.\nBasic HTML code is allowed.

» Get social

When butter and chocolate collide

TWO New Zealand companies Lewis Road Creamery and Whittakers have teamed up to deliver what must be every dairy lover’s dream: chocolate butter.

» E-Newsletter

Subscribe to our mailing list

* indicates required