June 7, 2013

Murray Goulburn supports firm milk price forecasts

 

 

Murray Goulburn further underpinned doubts over the extent of the milk price correction by joining processors revealing upbeat estimate for milk payouts in 2013-14.

 

The co-operative, which processes about one-third of Australia's milk, said that demand for dairy products "remains strong in key markets in Asia and the Middle East", forecasting growth of more than 5% in the traded world dairy market.

 

However, growth in milk supplies up for grabs was expected at less than 1%, the Victoria-based group said, cutting its forecast from 2%.

 

Murray Goulburn managing director Gary Helou said, "This shift in the balance between supply and demand has resulted in the recent surge of international dairy prices," which in April set a record at GlobalDairyTrade auction.

 

"Prices are expected to stay strong during the next six months," depending on factors such as foreign exchange rates and milk supply growth.

 

The comments follow a GlobalDairyTrade auction on Tuesday (Jun 4) which saw a third successive decline in prices, with values of whole milk powder now down more than 18% from their April peak.

 

However, they tally with forecasts from other processors of the correction finding only limited traction, with New Zealand-based Fonterra, the world's biggest dairy exporter, last week flagging expectations that dairy commodity prices "will continue at or near current levels until the fourth quarter of 2013.

 

"Most external forecasts point to prices remaining relatively strong through 2014," Fonterra added, forecasting growth of 0.5% in milk production in the top 15 exporting countries this year, down from 1.8% in 2012.

 

"Although we are seeing modest production growth in the US, recent cold conditions in Europe have had a negative impact on crops and dairy, and the outlook remains mixed," the Auckland-based group said.

 

Oceania processors have backed forecasts of firm prices with elevated forecasts for milk payouts in 2013-14.

 

Murray Goulburn on Wednesday forecast a full-year price of AUD5.80-6.00 (US$5.53-5.73)/kg of milk solids, equivalent to about AUD0.45 (US$0.43)/litre, offering its producers an effective initial price of AUD5.60 (US$5.34)/kg of milk solids.

 

That opening price, up 24%, is the co-operative's highest on record, and above the levels that industry group Dairy Australia has expected processors to offer.

 

Dairy Australia last month forecast an opening price of about AUD5.00 (US$4.77)/kg of milk solids, and potential 2013-14 result of about AUD5.50 (US$5.25)/kg of milk solids.

 

However, it added that "the sharp increase in commodity prices during the first three months of 2013 suggests there is upside potential to a US$5.00/kg of milk solids opening price depending on processor carryover benefits and value-added sales late in the 2012-13 season".

 

Last week, rival United Dairy Power upped the ante by forecasting an opening price for the industry around the "high AUD5 (US$4.77)/kg of milk solids mark".

 

Bega Cheese, the listed Australian cheesemaker, last week unveiled a rise equivalent to about AUD0.5 (US$0.48)/litre to its milk payment rates.

 

Fonterra made an initial forecast of paying its producers NZD7.00 (US$5.60)/kg of milk solids for milk in 2013-14, a record opening estimate, and well above the NZD5.80 (US$4.63) pencilled in for 2012-13.