Milk price uncertainty as Oceania braces

Milk price uncertainty as Australia braces

Dairy
TURBULENCE AHEAD: Australia's dairy industry has been insulated from the upheaval facing US and Europe but the future is uncertain. Image by David Hauser.

TURBULENCE AHEAD: Australia's dairy industry has been insulated from the upheaval facing US and Europe but the future is uncertain. Image by David Hauser.

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XCheque analyst Jon Hauser says farmgate milk opening prices will be difficult to pick as Australia won't really know the true impact of the coronavirus crisis on the local dairy industry until August.

Aa

Xcheque analyst Jon Hauser says farmgate milk opening prices will be difficult to pick as Australia won't really know the true impact of the coronavirus crisis on the local dairy industry until August.

Dr Hauser says that, until then, Australia and New Zealand will mostly insulated from the turmoil hitting the United States and European industry.

"It's just very confusing at the moment because the Oceania data is not suggesting that there's much of a fall," he said.

Fonterra's auction, the Global Dairy Trade (GDT), had been falling but not significantly and the exchange rate had helped keep returns healthy.

It was a different picture in the US and EU, where prices were 10 per cent lower.

"The numbers coming out of Europe and America are horrendous and, and we will drop to that level as soon as volume starts moving out of New Zealand again when they get out there and sell forward what they produce in the spring," he said.

Australian processors had already sold all their product from the current season and NZ had sold most, insulating them from northern hemisphere price drops.

"Because they don't have very much to sell, they don't need to sell, so the price stays high," Mr Hauser said.

"It only starts to drop when Fonterra NZ have to sell when they start getting to a point at about August where they just can't keep stock.

"As soon as the volumes start building out of the factories in New Zealand, it has to be sold ... and so they start accepting whatever prices available rather than trying to set the price."

But there was hope, with analysts around the world forecasting a shorter than usual fall in prices, as neither the US or EU were stockpiling large volumes of subsidised product.

The uncertainty won't ease before processors are forced to announce opening prices by June 1 under the new mandatory code of conduct.

"I can't imagine what the conversations look like between the milk supply people and and the marketing people and the operations people in the moment they would be desperately trying to work out what to do," Dr Hauser said.

"But I'm not sure that saying what the price should be or what processors are going to do right now is helping anybody."

The story Milk price uncertainty as Oceania braces first appeared on Stock & Land.

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