Hunt for new dairy price lead

New dairy market forces at play in 2020

Dairy
CONTRACT GRAB: Several supermarket private-label contracts are due for renewal in 2020, one of two important factors to watch for the Australian dairy industry.

CONTRACT GRAB: Several supermarket private-label contracts are due for renewal in 2020, one of two important factors to watch for the Australian dairy industry.

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This year will be one to watch for Australian dairy with potential changes to two major market factors.

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This year will be one to watch for Australian dairy with potential changes to two major market factors.

Rabobank's senior analyst dairy Michael Harvey flagged the hunt for a new price leader in southern markets and new private-label milk contracts as factors to watch for in 2020.

Mr Harvey said with the Mandatory Code of Conduct now in force, dairy companies were obligated to publicly announce milk prices for 2020/21 by June 1.

"A company will need to lead in announcing first," he said. "Meanwhile, how milk is priced will continue to evolve, with a move away from benchmarking to market-based pricing."

Mr Harvey said a number of drinking milk private label contracts for the two major retailers were up for renewal.

"A keen eye will be on who the winning bidder is and how the value is distributed through the chain," he said.

Mr Harvey said Australian milk supply would continue to decline in 2020.

It had already fallen 5 per cent by the mid-way point of the 2019/20 season and ongoing extreme drought conditions in northern milk-drinking regions, challenges for the Murray irrigation region and the impact of bushfires in NSW and Victoria would negatively impact production.

The milk price outlook remained a bright spot heading into the 2020/21 season.

"The modest outlook for milk production growth across the major exporting regions will be broadly positive for global commodity prices in 2020," he said.

But based on Rabobank's modelling, global market pricing did not support another milk price increase before the end of this season.

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