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Australian Dairy Update December 2016

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December 2016

Dairy

Good news for dairy markets this month as the Global Dairy Trade Index reached a two year high. Skim milk powder averaged $3,457/tonne at the first December auction, the highest average price since April 2015 and above the five-year average. Cheese prices are following a similar trend to milk powder, recording $5,048/tonne which is the highest average price since August 2014.

A key issue in 2017 may be the trade relationship between the United States and Mexico, the world’s largest milk producer and the largest importer of US dairy products respectively, if the relationship degrades under the new US administration it may lead to extra US dairy products on the world market.  

Rainfall between September and November was very much above average for southern and eastern states, while the dairying area of WA was below average. The forecast for much of the country is a dry summer particularly on the east coast.

The chopper cow market remains strong across the country, with prices trading around the 80th percentile in most states. Throughput remains high historically however there are less cows going through the yard compared to this time last year.

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Price

Data: Dairy Australia, MLA, RBA, AFIA, Index Mundi, GTIS, GDT, Profarmer
*Southern states includes VIC, SA and TAS.
** Melbourne contract FED1 12 months of data from September 2015.

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Production

National milk production is down 10.3% year to date to October. Each month of the 2017 financial year has recorded a reduction in supply of around 10%. This is consistent with a worldwide trend in major milk producing nations such as NZ and the EU. Drinking milk sales overall are down 0.5% August year-to-date.

Milk powder exports are 9.1% lower for October year to date, due to the Indonesian market which is 23.5% down on quantity compared to this time last year. Cheese exports for July to October 2016 are down 11.5% year to date. The quantity exported to our largest market Japan is down 27.6% for the period of July to October. The total value of dairy exports for the third quarter of the 2016 calendar year was $443.5M which is down 11.1% on the third quarter of 2015. Year to date figures show an 8.7% decline in total value of dairy exports compared to 2015. China recorded 32.2% growth in value compared to the third quarter of 2015. 

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Demand