Oceania Dairy Market Overview

MADISON - Jul 8/10 - SNS -- The USDA published its latest review of dairy market conditions in Australia and New Zealand today.

OCEANIA OVERVIEW:  The major topic of discussion in the
Oceania region is the outcome of the recent global/Dairy
Trading event held on July 6.  Most traders and handlers of
dairy products anticipated that prices would trend lower, but
the sharp declines were a surprise to many.  The average price
for all contracting periods for anhydrous milkfat declined
14.1% to $4,620 per MT, skim milk powder declined 11.8% to
$3,067, and whole milk powder declined 14.8% to $3,224.  It is
still too early to realize what impact these auction prices
will have on current pricing structures, but handlers and
traders are stating that these prices send a market sentiment
to current markets.  Many state that this is an auction and
depending on who is at the auction, the outcome is always
uncertain.  International supplies of most dairy products have
been limited in the last few months, but recently, supply
tightness has eased as milk production is seasonally strong in
the Northern hemisphere.  Many state that lower auction prices
are sending a message to potential buyers that product prices
will be lower.  Most Oceania traders and handlers will be
adjusting their prices, but will probably not adjust to the
extent of the sharp auction declines.  As what occurred at the
auction a few months ago when prices spiked sharply higher,
commercial pricing did not adjust to those level and likewise
in this situation, prices will probably not adjust to these
much lower levels.  Traders and handlers feel that sharp
swings one way or another are situations that can occur at an
auction which are not indicative of current market trends.
Many within the dairy industry are looking forward to the
twice a month auctions which will begin in September, stating
that this will hopefully ease volatility within the market.
Milk production in the Oceania region is at seasonally low
levels.  Many milk handlers and processors are stating that
farmer optimism is favorable.  Although New Zealand producers
ended their most recent season quite suddenly, the outlook for
the new season is positive.  Various projections for milk
production in New Zealand during the upcoming season are as
much as 14% higher, with many projecting a 9 - 10% increase to
be more probable.  In Australia, the 2009 - 2010 milk
production year came to an end on June 30th.  Early reports
are that annual output will have trailed the 2008 - 2009
season by about 4%.  Late season strength is what helped
second half figures to be positive when compared to the
previous year.  Early 2010 - 2011 projections are that output
in Australia will be 1% higher than last season, with some
more optimistic and projecting a 2 - 3% increase.  Farmers in
both New Zealand and Australia are looking to the new season
with confidence.  Many feel that farming margins will be
better this season as grain and milk prices will be working
together versus against each other as they have been in recent
years.  Milk processors are looking forward to a good
production year and are hopeful that farmers will take the
positive year as a recovery year and not over react with their
operations.


0930c

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STAT News Service

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