December 13, 2011


Dairy Australia's milk price forecast stays


Dairy Australia's earlier forecasts of a milk price between AUD5.10 (US$5.14) and AUD5.50 (US$5.55) per kilogramme milk solids for the current year remains at the same level.


Speaking at a Murray Dairy business forum at Moama last week, Dairy Australia's trade and strategy manager Chris Phillips said he was sticking with the initial forecast, but leaning towards the lower end of the range.


Phillips said there was strong underlying international demand for dairy products, but some factors indicated caution in price expectations. He said banks were talking about the Australian dollar weakening and heading down towards the US$0.90 area.


''The silver lining for us is the forecast that commodity-based economies like Australia would likely be weaker in US dollar terms in the year ahead,'' he said.


Phillips said he was reasonably optimistic about the strong underlying demand for Australia's dairy products and there were some growth opportunities available. He said prices in the past few months had been slowly softening given there were more milk around.


New Zealand has had a good spring, the Latin Americas were producing more and US production was still expanding.


''But there are swings and roundabouts,'' he said. For example, in Brazil extra milk production was being absorbed in their own domestic production.


There was an underlying demand particularly in Asia, including China, Japan and Korea. China had not been importing milk powders at the same growth level as last year, but was still ahead of last year's volumes.


Phillips said commentators were discussing whether this was affected by a new trade agreement with New Zealand. China was still expecting a growth rate next year of 8-8.5%.


In the background to all of the forecasts was the concern about what was happening with the global economy.


Phillips was speaking at a business forum breakfast attended by dairy service providers.

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