Latest Dairy update

Milk processors revise opening prices higher amid strong competition for Australian milk supply, despite softer global dairy product prices.

The highest opening milk prices on record were observed in June, as processors compete for milk solids (MS). After initially opening at $8.65/kg MS, Fonterra revised its opening price earlier this month to $9/kg MS. Other major processors such as Saputo followed suit increasing from $9.15 to $9.30/kg MS. 

The weighted average milk price in southern regions is expected to be around $9.15/kg MS despite global dairy prices remaining below year ago levels.

Milk Production

The latest supply figures from Dairy Australia show Southern states (VIC, TAS and SA) experienced an increase in supply in May, increasing by 8.8 per cent (pc) to 495.2 million litres. The increase was driven by Victoria, increasing by 14.1 pc to 388.2 million litres compared to April. 

Year on Year (YoY) Tasmania was the only state to record an increase in production, up 3.2 pc to 877.6 million litres. While New South Wales and Queensland recorded a YoY decline of 8.6 pc and 7.3 pc respectively.

In the northern states (NSW and QLD) supply increased by 4.4 pc to 100.8 million litres in May, compared to April. New South Wales recorded an increase of 5.5 pc in May after a decline in supply for April. YoY production was down 8.3 pc to 1.16 billion litres. 

In the west, WA milk production increased by 7.4 pc in May to 28.1 million litres. Year to date production remains relatively flat at 0.7 pc below the previous season. 

Inputs

Hay prices eased across most regions in June with continued rainfall and subdued competition from other industries, leading to softer demand. However, prices remain well above levels from a year ago.

_{Table showing the average price for pasture hay in key dairy regions.}

_{Source: The hay report is produced for Dairy Australia by the Australian Fodder Industry Association (AFIA) – the national independent voice for the Australian fodder industry which connects the entire supply chain from seed to feed. For further information: www.afia.org.au}

Grain

Trent Smoker, General Manager, Clear Grain Exchange said Northern Australian feed demand pushed prices higher in June.

Local feed grain prices have pushed higher late in June, while prices for higher quality grain have been mixed as buyers and sellers react to international news. 

Weather forecasts, the world balance sheet and evolving geopolitical news in the Black Sea remain some of the major drivers in the current market.

Price spreads between lower grades of wheat and APW1 continue to decrease as feed grain buyers look at all options to fulfil their demand. A decrease in price spreads is not unusual in the post-harvest markets.  

_{Table shows best published bids and actual traded grain prices from Clear Grain Exchange.}

Water

Elders Water Market Update shows that temporary water markets are currently very slow, but indicative pricing is as follows:

_{Table showing the current temporary water prices for the respective zones.}

_{Source: Elders Water Market Update}

Export markets

Global Dairy Trade (GDT) reported a decline in price for both skim milk powder (SMP) and cheddar in the most recent auction event. SMP averaged $2,667/t in the latest auction in June which is 37.6 pc below the same time last year. While cheddar prices averaged $4,533/t which is 7 pc below levels from a year ago. 

_{The information contained in this article is given for the purpose of providing general information only, and while Elders has exercised reasonable care, skill and diligence in its preparation, many factors (including environmental and seasonal) can impact its accuracy and currency. Accordingly, the information should not be relied upon under any circumstances and Elders assumes no liability for any loss consequently suffered. If you would like to speak to someone for tailored advice relating to any of the matters referred to in this article, please contact Elders.}