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Ag News

Celebrating International Dairy Week

  • By: "Prime" Ag News
  • Feb 04, 2018

By Neil Findlay

International Dairy Week is always a great opportunity for a get together, and I was thrilled to host 90 customers and industry reps at a NAB Agribusiness Trade and Export Forum last week.

We were privileged to hear from a fascinating panel consisting of David Blackmore of Blackmore Wagyu, Peter Jones from Australian Consolidated Milk, Chris Ryan from the Port of Melbourne, and NAB’s own agribusiness economist Phin Ziebell.

They provided valuable insights on how to manage risk and keep a consistent product when exporting, including the importance of always dealing with reputable third parties, and spreading your risk among multiple distributors and countries. Don’t put all your eggs in one basket was the key message here!

More generally, farmers in the room were cautious about the future, despite large investments and growing optimism in the processing sector about milk supply.

For instance, Fonterra Australia just announced an investment of $165 million to build capacity for an extra 500 million litres of milk, while Australian Consolidated Milk will look for an additional 200 million litres once their new factory at Girgarre is finished.

Add to this the speculation around the sale of Murray Goulburn to Canadian giant Saputo, and there is a lot of momentum in the industry.

The dairy industry’s come through a volatile couple of years, combined with rising farm costs for many, so there was an interesting discussion about what this might mean for the industry and the region.

I get the feeling many will need farmgate price signals to be on the way up to encourage them to invest or expand so that they can contribute to the level of supply that will be needed in the coming years.

The outlook does vary with some Victorian regions experiencing better seasonal conditions than others.

While NAB is not expecting much of an increase in milk supply this year, prices are holding, with most major processors announcing step-ups to the mid-$5 range this season.

There’s been some relief this year to a downward trend in global prices in USD terms, but the strength of the Australian dollar has eroded those gains.

While multiple factors have conspired to push the AUD/USD firmly back into the 0.77 to 0.80 range, NAB is still confident that the AUD will spend most of the year under USD0.75.