Australian dairy supply is in demand

STRONG global demand for dairy products has combined with weaker production, boding well for Australian dairy farmers leading into next season.

In the past week the European Union has sold 40,000 tonnes of skim milk powder from its intervention stockpile, while Algeria has bought a couple of thousand tonnes of powder on top of existing orders, according to Dairy Australia analyst John Droppert.

Mr Droppert said the recent news of more SMP sold out of the EU demonstrated demand was “chewing through the stockpile quicker than expected” and followed another sale of 25,000 tonnes last month.

He said this, and continued strong demand for butterfat in the EU, was reflected in last week’s Global Dairy Trade auction results.

GDT increased an average 1.9 per cent to $US3637 a tonne, with a three per cent rise in the value of SMP to $US2047 a tonne, and a 0.2 per cent increase in whole milk powder to $US3226 a tonne.

Cheddar cheese was up 4.4 per cent to $US4205 a tonne.

Mr Droppert said conditions were looking a lot better than up to four months ago, but warned there were still “challenging” conditions on the domestic market.

Some Australian processors have announced opening milk prices for next season, starting July 1, but farmers are waiting to hear from the two major processors, Saputo and Fonterra.

There are positive pricing signs for New Zealand farmers next season.

Rabobank dairy analyst Emma Higgins, who is based in New Zealand, forecast a farmgate price of $NZ6.40 a kilogram of milk solids ($5.88/kg of MS).

Ms Higgins said more favourable weather, better yield from cows and a supportive milk price would help lift production a “modest” two per cent.