Report 35 – Released on August 29, 2019

AUSTRALIA:

Australian milk production is increasing from the seasonal low, and the trend line typically becomes more vertical in September. However, milk availability is still considered tight. The short supplies have impacted whole milk powder production in particular. Some manufacturers report that not much WMP is being made in Australia now because milk is being diverted to butter/SMP, where returns are better. Milk production in Australia during June 2019 was 7.4 percent lower than June 2018, according to Dairy Australia.

Milk production for the season which ended in June 2019 was 5.7 percent lower than the previous season. A large dairy cooperative reports that its Australia milk collections during July 2019, the first month of the Australian milk season, were down 28.9 percent from July 2018. However, July production represents a small percentage of the total seasonal milk production. The cooperative notes that its individual results reflect a declining share of total milk production, in addition to Australia wide factors.

Other more universal factors in Australia include high cull rates following the 2019 drought, farm retirements, and relatively high input costs. Recent rains in Northern Australia helped crop planting schedules. Unfortunately, the lack of post planting rain has challenged crop progress. Hay remains in short supply and new season hay may not be sufficient. There is more early optimism about hay in Southern Australia for this season. Not so much right now, but as the season moves forward. Crops in Western Australia look promising for the season, even though they are off to a slow start.

NEW ZEALAND:

July 2019 New Zealand milk production reported by DCANZ was 0.274 million MT, up 4.6 percent from June 2018 milk production, 0.262 million MT. July 2019 milk solids, 23,539 million kg, are up 4.8 percent from July 2018, 22,470 million kg. With the nearly one month reporting lag for July milk production data, and with August nearly complete, it is helpful to recall that New Zealand milk production typically increases sharply during August. During August last year, milk solids production increased 418.4 percent.

Production in MT increased 427.9 percent. The seasonal peak will not occur until fall, but current production is up significantly from the low point in June. The recent financial write downs by a large dairy cooperative were received in varied ways by dairy producers. Before the formal announcement there had been a lingering sense that some bad news was pending. Even so, when the announcement was made, there was not a great feeling. The coop has been undergoing a strategic review since last year.

Expectations are that a new strategy may be released when financial results are scheduled to be released on September 12. The write down does not affect the milk pay price. While this may be a distinction with no difference in terms of dairy producer cash flow, it will affect share dividends. Dairy producer members are required to hold shares.

 Information for the period August 19 - 30, 2019, issued biweekly

     Published by:
     Dairy Market News - Madison, WI
     Eric Graf, 608.422.8590
     Email: Eric.Graf@usda.gov

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