Global prices trend upwards

19 Dec, 2018 08:40 AM
Comments
0
 
Prices were up on the Global Dairy Trade auction on Tuesday night but still have a way to go to make up for losses this year, Source Global Dairy Trade
Rabobank has trimmed its weighted average farmgate milk price for southern Australia to $5.65/kg MS.
Prices were up on the Global Dairy Trade auction on Tuesday night but still have a way to go to make up for losses this year, Source Global Dairy Trade

Global Dairy Trade auction prices increased 1.7 per cent on Tuesday night, consolidating the gains achieved in the previous auction on December 4.

In its latest Quarterly Update, Rabobank says global markets could "move rapidly upwards" in the first half of next year as production tightens in several major dairy exporting regions around the world.

But Australian farmgate prices will be constrained.

Rabobank has cuts its weighted average farmgate milk price for southern Australia to $5.65 a kilogram milk solids.

"This is not surprising," the Rabobank report said.

"The Australian dollar has averaged $US0.72 since the season began.

"This is down 6pc on the 2017/18 average and has provided some relief for exporters.

"However, it has not been enough to offset the weaker Oceania commodity prices since the start of the season."

In its September update Rabobank had forecast a full-year average commodity farmgate milk price of $5.90/kg MS, while in its June update it had also forecast a price of $5.90/kg MS but said "a full-year price of $6.40/kgMS is now within reach".

Related reading

  • Fonterra cuts NZ farmer advance payments
  • Dairy exports slow as production drop bites
  • Global dairy trade up 2.2 per cent
  • Rabobank says uncertainty abounds in global markets.

    Combined production from the 'Big 7' dairy exporters is expected to grow by just 0.6pc year-on-year for the last quarter of 2018, despite big production increases in some regions.

    "Slow and very modest milk production growth lies ahead

    for the major export regions over the next 12 months." the report said.

    Coupled with steady demand, the market could move rapidly upwards and catches buyers unaware, Rabobank said.

    Tuesday night's GDT auction results backed that assessment of a tightening market.

    Prices were up in all indexes, with the exception of the rennet casein index, which was down 2.1pc.

    But Tuesday's average price of $US2844 a tonne is still the third lowest price since August 2016.

    The big improvers on Tuesday night were butter (up 4.9pc to $US3928/t), anhydrous milk fat (up 4pc to $US4936/t) and skim milk powder (up 3.4pc to $US2042/t).

    Rabobank's report said the lid on SMP – firmly held in place over the prior two years – might be lifting, as the European Commission winds down its stockpile.

    Rabobank said the net exportable surplus available from the ‘Big 7’ dairy exporters (the United States, the European Union, New Zealand, Australia, Brazil, Argentina and Uruguay) would be limited across the forecast period to quarter one 2020 – with

    significant pressure for much of 2019.

    "Milk production growth has stalled in Europe and pulled back in Australia, impacted by the effects of weather conditions on feed quality, quantity and cost," the Q4 report says.

    "While the US looks set to see its lowest year-on-year growth in 2018, since 2013."

    Growth is good in other regions such as South America, "while New Zealand remains the star performer, setting a new record for peak milk flows in the month of October".

    The report said China was expected to increase its imports of dairy products in 2019 by double digits.

    "However, the uncertainty regarding economic growth remains," it said.

    For Australia, Rabobank is forecasting the rate of milk production decline to accelerate in the first part of 2019.

    "A period of sustained higher feed and fodder costs, along with no major improvement in farmgate milk prices, has put farmer margins under severe pressure," the Q4 report said.

    "For irrigation farmers in the Murray Dairy district, water trading prices remain near record levels."

    It said culling activity had escalated as farmers looked to lower feed bills.

    Rabobank has trimmed its expectations for milk production for Australia, forecasting national production for the 2018/19 season to fall by as much as 4pc, taking the milk pool below nine billion litres for the first time since 1996/97.

    "This sizeable drop in Australian milk supply is putting pressure on supply chains and dairy company sales mix," it said.

    "For ingredient customers, there are some ongoing shortages of milk solids."

    The tightening supply was reflected in exports with a swing away from milk powder exports to cheese, which offered better export returns.

    Page:
    1

    POST A COMMENT


    Screen name *
    Email address *
    Remember me?
    Comment *
     
    Best management practice of ryegrass and managing the residual height throughout dry periods is critical to enhance persistence of pasture. 
26 Dec 18 Best management practice of ryegrass and managing the residual height throughout dry periods is critical to enhance...
    A new definition of 'genetically modified' currently awaiting parliamentary approval could see a swathe of new grasses on the market within three years.
13 Nov 18 A new definition of "genetically modified" currently awaiting parliamentary approval could see a swathe of new...
    light grey arrow
    What I find confusion and strange is that the NEW AUSTRALIAN DAIRY PLAN has not got any form or
    light grey arrow
    I am so looking forward to this milk! I have been waiting a long time for it to be on the
    light grey arrow
    Don't fall for the processors changing their contracts. They can change them back again without
    Spending $2.7million to build a new dairy is part of a rolling upgrade and improvement plan for VAN Dairy Group, located at Cape Grim, Tasmania.29 Dec 18 Spending $2.7million to build a new dairy is part of a rolling upgrade and improvement plan for VAN Dairy Group,...
    Australian Dairyfarmer's Jeanette Severs checked out the range of new and interesting products and services on show at the South Gippsland Dairy Expo in September, while Peter Roach caught up with suppliers at the Elmore Field Days in October.02 Dec 18 Australian Dairyfarmer's Jeanette Severs checked out the range of new and interesting products and services on show...
    Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition opportunities.25 Sep 16 Australian farm chemical manufacturer Nufarm has repaired its balance sheet and is now hunting for acquisition...
    Monopoly market may confront cropping sector under mega-merger proposal.22 Sep 16 Monopoly market may confront cropping sector under mega-merger proposal.