The opening price is 25% higher than last season’s opening price. WCB is forecasting an end of season price range of A$5.90 to A$6.10/kgMS. Fonterra’s full year forecast is A$6/kgMS “plus or minus 10c”.
However, farmers are being warned things could change quickly. WCB chief executive David Lord says as the Industry has experienced in recent years, markets and exchanges rates are volatile and can move quickly up or down. “In this environment we need to be aware that this volatility can impact on the industry and on milk prices paid,” says Lord.
Global dairy prices have firmed in recent months, mostly on the back of supply concerns out of New Zealand. But with the New Zealand drought over, prices have eased, though they remain historically high. The recent easing of the Australian dollar has also helped export receipts.
Lord says these movements have been positive and give the industry confidence for the first half of the season when prices are expected to remain strong.
“Given the volatility of the many external factors, such as milk supply growth, market demand, world dairy prices and exchange rates, it is difficult to predict in the longer term, and we maintain a cautious approach to the second half of the year.”
Fonterra’s managing director Australia Judith Swales says its strategy is have the most competitive dairy supply chain and it starts with profitability for suppliers. “That’s why we are pleased to reflect the improved market conditions with a strong opening price for next season.”
Murray Goulburn opens the season with an effective initial price of A$5.60/kgMS and forecasts an end of season price range of A$5.80-$6/kgMS.
The actual opening price is $5.47/kgMS with an option of a 13 cent pre-paid final step up. MG’s opening price last year was A$4.50/kgMS.
MG managing director, Gary Helou, says MG’s opening price reflects the positive impacts of the A$100 million operational savings, higher world dairy ingredients prices and a softening Australian dollar.
“Demand for dairy food remains strong in key markets in Asia and the Middle East with growth in traded global dairy market expected to exceed 5% per annum.
“On the other hand, global supply of dairy products was hampered by negative seasonal conditions in key exporting regions, including New Zealand, Australia and Europe.
“Growth in global traded milk supply this year is expected be less than 1%, or half the previously forecast 2%. This shift in the balance between supply and demand has resulted in the recent surge of international dairy prices.”
Helou agrees with Lord that although prices were expected to stay strong during the next six months, factors like growth in supply, foreign exchange and continued strong demand would shape prices during the second half of the year.
Independent Australian processor United Dairy Power has flagged an opening milk price of A$5.80/kgMS. UDP is seeking as much as 80 million litres in extra milk supply in 2013-14.
