Issue 11 – 30 May 2014 export regions as commodity prices settle below recent peaks: Global Developments see http://www.dairyaustralia.com.au/Markets-and- GlobalDairyTrade (GDT) event 116 on 20 May concluded with a statistics/Market-situation-and-outlook.aspx 1.8% decrease in the GDT Price Index: the weighted average Australian Dairy Farmers Cooperative (ADFC) partners with price for all products was US$3,873/t. The sharper fall than event Bulla Dairy Foods (Bulla): the newcomer supplier co-op has a 115 (down 1.1%) was surprising for many, following a month of long-term agreement with Bulla to supply up to 120 million slowing price declines. SMP (down 3.5% to average US$3,733/t) litres. ADFC has announced “a guaranteed flat rate opening was a key culprit: outside GDT as well, SMP prices are under heavy price of $6.53 per kg/MS” and is looking to match export- supply-driven pressure. Butter also pushed the average lower: focused competitors pricing. With this development, Bulla prices were down 3.8% to US$3,667/t. AMF bucked the trend (up addresses some supply risk concerns while ADFC establishes 1.9% to US$4,255/t) as did rennet casein (adding 4.6% for an further support for competitive farmgate pricing, especially in average of US$11,861/t). Despite a 2.6% gain for November Western Victoria, as competition for milk intensifies. supply, losses on early contracts saw WMP prices ease 1.1% overall for an average of US$3,877/t. Full results at Peters’ sale confirmed: Europe’s second largest ice cream http://www.globaldairytrade.info/ manufacturer R&R Ice Cream has purchased Peters Ice Cream from Pacific Equity Partners (PEP). Peters last changed hands Fonterra and Nestlé this week outlined agreements ‘to realign’ when acquired by PEP from Nestle in 2012 for somewhere their Latin American joint venture Dairy Partners Americas south of $300 million. Fairfax Media suggests that R&R have (DPA). Although still pending regulatory approval, key elements paid $400-450 million for Peters and its brand portfolio, which of the deal see Fonterra (1) taking a controlling stake (51%) in the accounts for just under 30% of the value of the $992 million DPA Brazil business, which will focus on chilled dairy; (2) retail ice cream market according to Nielsen. R&R have partnering with a local entity in Venezuela to take Nestlé’s interest indicated that they intend to maintain operations at Mulgrave. in the DPA business there; (3) selling its DPA powders business to Burra steps up: Gippsland-based Burra Foods has announced Nestle; and (4) offloading the DPA Ecuador business to Nestle. The its sixth step-up of the season: 8 c/kg fat and 20 c/kg protein. JV partners launched DPA in 2003 and also operates in Trinidad and Tobago, Paraguay and Uruguay. The Australian Front May 2014 Situation and Outlook: Australian raw milk production has recovered some ground after a slow start to the 2013/14 season. Favourable weather and strong farmgate milk prices for most regions have supported the recovery in southern exporting regions; milk production in northern Australia continues to struggle given particularly unfavourable seasonal conditions. At this stage, Australian milk production for 2013/14 is expected to finish between 9.1- 9.2bn litres, a modest lift from Dairy Australia’s last production estimate. According to the latest National Dairy Farmer Survey, farmer Australian Export Index (Base = 100 at Jan 2000) confidence has improved significantly in most regions over the last 12 months with 75% of farmers now positive about the future of This Last 3 the industry, compared to a low of 43% this time last year. Farmer Week Month Months ago confidence levels across most dairy regions in Australia reflect strong farmgate pricing signals and improved seasonal conditions. Index (USD) 278.3 278.3 311.4 Dairy commodity prices have weakened in recent months, Index (AUD) 197.5 196.7 227.1 however, as dairy farmers around the world responded to strong farmgate price signals. Dairy Australia’s Export Region Weighted 0.9236 0.9274 0.8985 Cost and Income Indices suggest leaner dairy margins for southern AUD/USD Contact: Glen Fisher Phone: (03) 9694 3731 Email: [email protected] Whilst all reasonable efforts have been taken to ensure the accuracy of the Fortnighlty Update, use is at one’s own risk and Dairy Australia disclaims all liability for any loss or damage stemming from reliance upon it. © Dairy Australia Limited 2014. All rights reserved. .