International dairy slump forecast

The Australian Dairy Farmers Federation has warned local farmers to expect a 25 per cent fall in milk prices this season, in the wake of a collapse in the international dairy market. ADFF's CEO John McQueen says that subsidised overproduction in the United States and European Union have caused a slump in prices for milk, butter and cheese.

The US has nearly 500,000 tonnes of skim milk powder in storage, said Mr McQueen, and over the last six or seven months prices have fallen from above $US2,000 a tonne to around $US1,200-$US1,300 a tonne. Milk processors reliant on the export market are now thinking about dropping returns to dairy farmer suppliers. In the European Union, export subsidies on skim milk powder were zero last October but are now equivalent to $US600 a tonne. As export subsidies have risen world market prices have fallen, Mr McQueen stated.

New Zealand dairy farmers are already feeling the impact of a world market slump, with dairy giant Fonterra dropping its forecast milk price for the coming season by 50 cents to $4 a kilogram for milk solids. As the dairy industry is responsible for 7 per cent of the NZ GDP, a fall of this magnitude will hurt the wider economy, said Fonterra spokesman Matthew Hooten.

Aust cheese popular in US

A buyer for US specialty food retailer Trader Joes, in Australia to source cheeses, says that there is "definitely a developing taste for Aussie cheese in the US market right now". Kimberly Cruelle, Trader Joes' deli and cheese buyer, said she's interested in cheese from large and small suppliers, and particularly specialty cheeses.

Trader Joes operates 160 food stores on the US east and west coasts. Ms Cruelle says that the company can regionalise its store purchases, which means that smaller companies can supply only 10 or 15 per cent of Trader Joes' stores where necessary. This is an advantage if small manufacturers do not have enough output to supply all of the outlets, she said.

Dairy Farmers CEO determined to restructure

Dairy Farmers Group's CEO, Alan Tooth, has foreshadowed a third attempt to change the structure of the 100-year-old co-operative. He said yesterday that he hasn't given up on restructuring, despite failing to get the required 75 per cent from its members last year, and 1999's attempt, which was stopped after court action by dissident farmers.

Mr Tooth said that he will try again and do some more work with the co-op's members, as the current capital structure as a co-operative is unsustainable if it is to achieve its objectives and grow the business. Dairy Farmers is believed to be working on a new restructuring proposal with ANZ Investment Bank, which was appointed last year to advise on options for restructuring debt and funding expansion opportunities.

Milk output overflowing

Milk production rose by 17.2% in March 2002 taking Australia's national milk production for the month was 858.5 million litres. Total milk production for the financial year to date is now 9,175.3 million litres, an increase of 6.1% over the same time last year.

Victoria and Tasmania have had the largest production increases, attributed to favourable climatic conditions and greater investment in the sector since deregulation.

Export demand for dairy cattle booming

Countries such as Kuwait, Mexico, China and Argentina are turning to Australia for dairy cattle as a result of animal diseases such as mad-cow disease (BSE) and foot-and-mouth (FMD) crippling the northern hemisphere's live dairy cattle trade. Australian dairy heifers are now in such strong demand that the Victorian supply has almost been soaked up, and now Wesfarmers Landmark is looking interstate to fill overseas orders.

Wesfarmers Landmark has exported in excess of 20,000 heifers already this year, with another 2,100 expected to be shipped to China within the next few weeks.