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ausfine.com.au 5 April 2023
 
 
Dairy Planet Edition
   
Edition #   203
   
Dairy Planet Edition
 
1. gDT – China is BACK! But where was everyone else? - Discuss

2. Australian dairy farmers may have cause for pause if considering a beef transition

3. Looks like we’re back in the 1800s US wild west, train heists are a thing

4. Race is on to stop cows far… no let me rephrase, stop cows' flatulence
 
 

Firstly, some good news. China appears to be back. Chinese buyers were very well represented on the gDT auction platform last night scooping up the lions share of both the WMP and SMP that was on offer. The percentage of Chinese buying was back at levels not seen for quite some time. The not so good news, at least for dairy manufacturers, was that pricing continued to slide pretty hard across all categories. The biggest culprits for the downturn in demand appear to be South East Asian buyers (continued weakness) and Middle East buyers who had up until this event turned up with strong buying intentions. This reflects what we are seeing out in the international markets at the current time. Buyers are cautious with everything going on in the world; many are sitting on elevated inventories which are now costing real money so they are under pressure from CFO’s to get those volumes down, and to exacerbate the issue, demand appears to have slowed. It seems much of the world is collectively holding its breath to see how this next phase of global demand and pandemic impacts plays out. Can we possibly hope that the current relatively calm unwinding of global stimulus and the easing of supply chain issues continue or are we in for that predicted shock?


01
02

For an extending period, beef farmers in Australia have been enjoying outsized returns on their cattle as the entire national herd has had to be re-stocked during our recent good times (wet) after our prolonged drought period that saw the number of cattle reach historical lows. The restocking meant the number of cattle available for slaughter was lower and that drove pricing up. For our embattled dairy farmers peering over the back paddock fence to the neighbouring beef farmer and his new Landcruiser, it was an attractive proposition to hand in the 4am wake up calls for morning milking and replace with gazing over those black money makers grazing in the paddock. This was a real driver in the decline of Australian milk production over recent years as many dairy farmers moved across to beef. However, that may now be changing as the last LaNina (wet) comes to a close and likely replaced with ElNino (dry) the cattle available for sale has increased dramatically and pricing has fallen as a result. This is likely to continue for some time and may mean the loss of dairy farmers to beef might not be as bigger factor going forward.

 
 
 

We indeed live in crazy times. With the advent of things like Chat GPT, we are indeed in the future or are we? In some instances nothing has changed since the 1800s when masked bandits took over cargo trains at gunpoint in the wild west of the USA. It seems that as many of the USA’s big shippers made the move to use the nation’s rail as opposed to very expensive road transport the attraction to the thieves has been too much. It has become a huge problem in the US where idle cargo trains are being pilfered while they sit for extended periods. Thieves are looking for anything they can move and sell quickly. In our world, milk powder and cheese are not that attractive but it does still happen with many items ending up on Ebay. The bigger issue is damage to the product and the shipping seals that have been cut by the thieves to check out what is inside the FCL. Once the seal is gone we have a big traceability and product integrity problem. For reference, check out the images / videos of the thieves at work in Los Angeles. It looks quite dystopian and very depressing.


03
04

As mentioned in the previous Dairy Planet, our dairy industry faces many headwinds in the space of our impact on the environment and emissions. One of the biggest headlines is the emissions of methane from bovine flatulence (tried to put that as politely as possible). Methane is a big problem and one of the most intense contributors of all the gases to the greenhouse effect and climate change. Therefore, the race is on to try to solve or at least mitigate the issue. There are big advances in the types of feed that cows are receiving that reduce the methane emissions. One example is Asparagopsis which is a type of seaweed that produces bioactive compounds which prevent the formation of methane when added to a cow's diet. There is still a lot of work to do in this space including the effects on the resulting milk but it’s very encouraging. There is also effort being done on using by-products and processes from things such as cashew production which is cutting edge scientific work in this area. It seems that as each problem is addressed there are solutions out there which is a positive way to end this edition of the Dairy Planet.


 
Matt Cooper - CEO
 
Welcome to Ausfine
 
Matt CEO
 
Michael Lance has joined Ausfine as National Business Manager QSR Trading. Michael has over 20 years of FMCG experience in Beverages and most recently in Dairy (6 years). His experience extends to QSR, Commercial manufacturing, Bulk commodity trading, Food Service and Retail. He has a passion for Customer management and Customer Service which is aligned to our aim of being the most trusted Partner in Dairy. He is part of the Domestic Sales team and will continue to focus on our Domestic Sales growth agenda.

Michael and his family are based in Brisbane. When he isn't working, he enjoys outdoor activities (football and walking) and house renovating.

Join us in welcoming Michael to the Ausfine team!
 
 
Shipping Update  
 
Global Trends and Industry News:

> Contract rates (year-long and six-month contracts) this year in the transpacific and Asia-Europe will give exporters and importers a cut in shipping cost of 55% to 85% in most cases, when compared with 2022 costs. This is the largest year-on-year reduction in shipping costs for at least 7 years.

> Contract rates (year-long and six-month contracts) this year in the transpacific and Asia-Europe will give exporters and importers a cut in shipping cost of 55% to 85% in most cases, when compared with 2022 costs. This is the largest year-on-year reduction in shipping costs for at least 7 years.

> While Trans-Pacific rates have returned to pre-COVID levels, pricing in trans-Atlantic markets has not. Spot container rates from Europe to the U.S. — while falling — are still more than twice pre-pandemic rates. U.S. imports from Europe remain strong, with building materials supporting volumes.

> North America and Europe port congestion continues to decline, while China port congestion continues to fluctuate. The equipment situation remains healthy overall.

 
Yana
 
Global Dairy Market
 
 
Australian milk falls, weather outlook dry
 
 
 
The latest data from Dairy Australia shows Australian milk output fell 5.3% YOY in February. With the drop in February production, season to date production is now tracking 6.5% behind the prior year comparative. Across the states, Victoria’s milk output fell 6.9% YOY for the month, while output in NSW was down 8.7%. Tasmania’s milk intake rose 4.9% YOY in February – the only state recording a lift in production.

Meanwhile, the Australian Bureau of Meteorology has issued its outlook for April to June, with below median rainfall likely to very likely (60% to greater than 80% chance), with above average maximum temperature for almost all of Australia. February rainfall was below average for most of south-eastern Australia.

The El Niño-Southern Oscillation (ENSO) is currently neutral, however there are some signs El Niño may form later in the year. The Bureau has therefore issued an El Niño WATCH, meaning there is around a 50% chance of El Niño in 2023. Most models suggest a neutral state of ENSO (neither El Niño nor La Niña) will persist through the southern hemisphere autumn, with Pacific Ocean sea surface temperatures reaching El Niño thresholds during winter.

 
 
 
EU milk growth slowing
 
 
 
There are early signs of slowing EU27 milk growth based on just-released Feb-23 figures. Among major producers, Irish production fell YOY for the second month in a row – down 1.7%, a similar contraction to January. Germany and Poland are still growing, but at a slower pace relative to prior months – up 2.3% YOY and 1% YOY in February. These slowing trends are expected to continue in coming months, reflecting lower milk prices and reduced farmgate margins.

According to the most recent data, German supplies were up 2.7% YOY in week 12 (ending 26 March 2023). That was the 29th consecutive weekly YOY increase. Meanwhile, French milk production fell 3.5% YOY in week - the 19th consecutive decline. AHDB reports UK production rose 0.9% in the first 25 days of March after being up 2.1% in February, but supplies have declined YOY in the last week for which data is available.
 
 
US February cheese output up 0.4%
 
 
 
US cheese production rose 0.4% YOY in February according to the USDA, well below the expansion in availability of “manufacturing milk.” American cheese output rose 2.4% YOY for the month (with a 5.6% increase for cheddar alone) while “other cheese” (including mozzarella) fell 0.9% YOY. The Central and West regions contributed to the expansion in American cheese output almost equally for the month.

Combined NFDM & SMP output rose 8.1% YOY in February – the third consecutive YOY expansion, reflecting a 4.5% lift for NFDM and a 28.9% rise for SMP. Butter production was up 1.6% YOY in February, the fourth consecutive monthly increase. Dry whey production fell 5.3% YOY for the month – the fourth consecutive contraction.

February WPC production was down 9.8% YOY, reflecting a 7.5% YOY decline in output of WPC 50-89.9 products while WPC 25-49.9 fell 14.2% YOY. Lactose manufacture fell 10.4% YOY in February. MPC production in February rose 2.7% YOY, while WPI output declined 19.5% YOY.

 
 
 
GDT hammered on lacking demand
 
 
 
The first April event continued the rout for commodity prices on the GDT platform (with the exception of cheddar). The overall index fell 4.7%, the worst result since last August.

SMP lost 2.6% on average to US$2,579/t with falls across all contracts. WMP lost 5.4% on average to US$3,053/t, with significant falls for contracts with near-term delivery as well as a 6.6% fall for contracts with September delivery. Fats were also weaker; AMF was hammered 8% on average to US$4,736/t to widen the discount to butter, which lost 3.2% on average to US$4,595/t. Cheddar went against the tide, adding an average of 2.8% to US$4,167/t with big price increases for contracts with near-term delivery.

 
 
 
Dairy futures
 
 
 
Futures trended down; with big falls recorded for NZX WMP & AMF. All prices quoted in US$/t
 
 
 
 
Ausfine Foods International Pty Ltd
Suite 10, Level 4, 205-211 Forster Road,
Mount Waverley, VIC 3149,
Melbourne, Australia
ABN 12 006 926 123
T +61 3 9583 3588
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E sales@ausfine.com.au
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Ausfine Foods · Suite 10, Level 4 · 205 - 211 Forster Road · Mount Waverley, Vic 3149 · Australia