Dairy prices balanced

World dairy prices were riding high in the first quarter of 2014.

Whole and skim milk powder reached $US5043 a tonne and $US4918/t, respectively.

Those prices were predicted to fall 20 per cent by midway through 2015 according to Rabobank.

The downturn could be put down to improved weather conditions globally, and a slight easing in China’s import, which has lead to demand tailing off.

However, farm-gate prices may see some subdued counter-cyclical increases.

Rabobank senior dairy analyst Michael Harvey said Australia’s farmgate prices in the southern dairy market has been better than the domestic fresh milk focused northern market in NSW.

Southern producers, supplying powdered milk exporters, reported prices hit a current high of $6.80 a kilogram milk solids.

“Northern markets haven’t reaped the benefits from the up turn during the past two years and farmgate prices have remained stable,” Mr Harvey said.

“But there are signs from retailers and processors they will lift their farmgate price to guarantee supply, which has been contracting recently.”

Rabobank’s June Quarterly Forecast predicted the average Australian farmgate fresh milk price would fall five per cent in 2014-15 to 47 cents a litre.

However Lion, owner of Dairy Farmers, increased its farmgate price to 54c/L, which it said was the highest price recorded by suppliers in the region in recent years.

Lion’s director of agricultural procurement Murray Jeffrey said the increase was a reflection of Lion’s confidence in the industry.

“Lion has a clear growth strategy focused on winning in priority segments, like milk based beverages and specialty cheese,” Mr Jeffrey said.

Dairy Australia industry analyst John Droppert said while questions remain about the medium-term outlook for the global market, farmgate prices would not be as volatile as the global market.

“The fresh milk market is slower to adjust either way, and to some extent the full benefit in the near record global prices hasn’t been captured yet, so there is less to lose.”

He said green shoots were springing up for fresh milk producers, especially in the under-supplied NSW market, as processors looked to bolster the supply base.

Norco recently raised its average base price for a three-year contract to 55c/L, arguably the highest farmgate milk price in the country.

Fonterra’s managing director Judith Swales had also indicated the company was keen to bolster its supply, based in Victoria, Tasmania and southern NSW.

A major factor in the rise of the global market was China’s hunger for imports.

Mr Swales said Chinese demand for dairy products grew 40pc in 2013, due to a season of “horrendous” local supply.

Suppliers’ inventories were full, but imports were expected to recommence in the coming months.

THE Wilson family of “Burnside”, Jamberoo, recently doubled their herd and will expand their dairy in the near future.

Tom Wilson and his family – parents Mark and Marion and brother Luke – work about 290 hectares of land across several blocks on the NSW South Coast’s hinterland.

He said the herd increased from 130 to 270 when his neighbour, with an eye to winding down his dairy, sold.

“Our neighbour was looking to retire and we thought we might as well grab it,” Tom said.

“So we bought his herd and leased the property.”

Mr Wilson said while most of his neighbours were now contracted with Murray Goulburn, the Wilsons switched from Lion (Dairy Farmers) to Parmalat five months ago and were looking forward to reasonable farmgate prices and a good season.

“The end of last winter, and the early spring, was very dry last year,” he said.

“But we had a fair bit of rain in February.

“In fact, it was so wet it made it a bit hard to get the feed into the paddock.

“We are in a better situation now and we’re looking forward to good prices.”

The Wilsons were also upgrading their dairy, to accommodate the expanded herd.