THE temperamental Australian dollar during the past few years has created many ups and downs for the dairy markets while supermarket pressures are still having significant impacts on farmgate prices.
NSW DairyConnect chief executive Mike Logan said the production of liquid milk was going quite well for NSW dairyfarmers despite the dry conditions across the State, with feed availability in summer likely to become an issue.

Mr Logan said there was probably still room to increase farmgate prices.

“Prices have risen slightly but probably not as much as they could; rises at the farmgate are hindered by the dominance of the supermarket contracts,” he said.

“When the supermarkets insist of selling milk for a dollar a litre without any reference to the market it does limit the capacity for the processors to be able to pay what is a fair and international price for milk at the farmgate.”

Nearly all processing companies have increased their offerings for the coming year by varying amounts, Mr Logan said, depending on their circumstances with the supermarkets.

“Lion are losing some suppliers and are focusing very much on their higher value branded milk product,” he said.

“Murray-Goulburn have come in with discounted milk and want to buy milk against that, while I understand Parmalat have increased their offering in NSW and are looking to buy more milk.

“Norco are growing well with the Coles contract for northern NSW and Qld and they have been reasonably active in the market.”

Mr Logan said DairyConnect had started to field many inquiries for investment in the dairy industry in NSW, particularly in the manufacturing and powder businesses.

Dairy Australia industry analyst John Droppert said prices for dairy commodities were holding up despite the expectation the good New Zealand season would put downward pressure on prices towards 2014.

“Indications are we’re likely to see some of that strength in the market continue through into 2014, into the first quarter or even further,” Mr Droppert said.

“Whole milk powder is doing well at more than $US5000 a tonne, which is unprecedented – at the beginning of the year that sort of price was such a psychological barrier, obviously being positive for sellers and negative for buyers.” Skim milk powder has been trading lower, ranging from $US4380 a tonne to $US4680/tonne.

Mr Droppert said the increased demand from China for dairy products has been one of the other major influencers of market trends recently.

Rabobank dairy research (Asia) director Hayley Moynihan said the trade window to China should remain open for some time.

However, Ms Moynihan said the demand growth from China may see the country look to secure more diverse import options, rather than relying on one or two key product origins.

“Slowed growth in milk production in China has already seen their reliance on dairy imports grow by between 20 and 30% per annum during the past two years,” she said.

“The surge in Chinese buying in a shrinking global supply pool has squeezed many other buyers and held prices at high levels.

“Even when that rate of growth in imports slows, China will remain a major consumer of global dairy exports.”


Farmer point of view

DAIRY farmer Jamie Drury is being paid a similar price for his milk as what his father was paid 40 years ago but costs of on-farm inputs means that money doesn’t have a lot of stretch these days.

Mr Drury – a fourth-generation dairyfarmer – milks 270 Holstein cows at ‘Bonnie Doon’, between Tamworth and Attunga.

Originally from Taree, Mr Drury and his family have been farming at ‘Bonnie Doon’ for eight-and-a-half years, running the dairy on 134 hectares and leasing another 80ha on which to raise heifers.

For as long as his family has been dairying, they have been a direct supplier of milk to Lion, or its predecessors, and at the moment Mr Drury is contracted to produce 7000 litres of milk a day, which is sent to the company’s processing facilities in Sydney or Brisbane, depending on where it’s needed.

“Being a direct supplier, being the size we are and fitting the supply that Lion wants puts us in a good position as far as prices are concerned, but it could be better,” Mr Drury said.

“At the moment, if the export price is sustained that will help to put upward pressure on farmgate prices.

“There needs to be some serious movement in prices – not just at the farmgate and not only in the dairy industry, but across the agricultural sector.”

Source: The Australian Dairy Farmer – Farm Online News