Report 25 – Released on June 18, 2020

AUSTRALIA:

Australian dairy producers are looking ahead into the new milk season. Some industry officials believe the general level of confidence is building. Culling rates seems to have slowed. There is active herd building ongoing on some dairy farms, based on easing feed costs and more optimism for prices moving ahead. Some agricultural lenders feel it is still a bit tricky to be certain how much market improvement is driven by government intervention and how much is pure market dynamics. Dairy manufacturing in Australia is near the seasonal low. Almost all current production will be sold for consumption in Australia. Maintaining enough fluid milk for retail sales necessarily precludes very much dairy product manufacturing. That will increase in coming months.

NEW ZEALAND:

New Zealand is very quiet in dairy terms at this time of year. Production is seasonally low.Most cows have been dried off. Most dairy products still being manufactured are committed to contracts. Dairy manufacturing heavily favors WMP or UHT milk.

Uncertainty moving forward remains. To what extent will food service industry demands return to the pre COVID-19 levels, in terms of dairy products? Another factor of concern to some lenders is whether dairy pricing can sustain or increase over the next 3 – 6 months, a critical period for the New Zealand dairy season in terms of contracting.

Some lenders are concerned that whenever Government involvement in dairy markets eventually lessens, remaining fundamentals may not be able to sustain pricing. They hope for positive pricing outcomes, but remain cautious for now. U.S. government purchases of dairy products,as well as EU storage assistance, are mentioned. The concern is that when government purchases fade away, and storage assistance ends, increasing milk supplies may overtake diminishing demand and weigh on pricing. Other dairy officials are less concerned with that scenario. But the yin and yang of the divergent views hangs over the New Zealand horizon for now, with the new season stretching out ahead.