Andrew's blog

Bobby calf expose not good

Tonight's TV1 programme Sunday showed disturbing images of the handling of bobby calves.

We can't get away from it; to have a dairy industry we need to take calves away from their mothers at an early age.  I thought the animal psychologist on the program was over the top - calves and mums show distress when parted even when the calves are 100 kgs and properly weaned.  But there is a proper way to do it and the images of calves being picked up showed some sloppy practice.

NZX dairy futures over correcting?

If dairy commodity prices were a plane ride we'd all be sick by now.  Clearly the market is finely balanced with the following graph showing the movement in futures prices.

There is still too much milk being produced but I am expecting both Australian and NZ milk production to fall during the summer and autumn - Australia due to the current dry in Victoria and in NZ due to normal summer dry conditions and farmers responding to a low milk price environment.

Rabo picks milk price rebound

Interesting story in today's Global Dairy from Rabobank:

Even though milk prices are at or just above break-even cost of production levels this fall, global supply-demand conditions will likely improve by next summer. See the full story here

Dairy finely balanced

Today's gDT auction followed the trends forecast from the daily derivatives market - futures for WMP and other products had fallen steadily over the past two or three weeks since the last auction.  There is still a bit much milk being produced around the world and NZ's encouraging start (-7% in September) has been unwound somewhat with the peak only being 3% behind last year.

I would expect a few more auctions to be equivocal (which incudes trending down) before a strong bias is established in the December/post December period.

Same dairy chart - Chinese author

We like to keep our 'tabs' on the international market - most often reports come out from banks such as Rabobank, Goldman Sachs etcetera.  It is good though to come across some Chinese work and to see dairy through their own eyes.

The study is the China agricultural outlook for 2015–2024 based on China Agricultural Monitoring and Early-warning System (CAMES).  The authour is a Mr XU, Shi-wei.

The Rice dairy perspective

The following is an extract from the MyMilk newsletter - the author Robbie Turner is Head of European Markets for Rice Dairy International, a dairy risk management advisory.  It is a good perspective of how the market is more positive but balanced at present.  This mornings gDT auction which is slightly down is a timely reminder that while demand grows the market is particularly sensitive at the moment to supply movements.

Kiwi the new Rolls Royce?

First about dairy....

Down (and up) by the escalator?

The normal saying is, of course, "Down by the escalator and Up by the stairs" referring to market movements.  The escalator is the precipitous fall in prices that we saw in July and early August.  The stairs was supposed to be gradual price increases over the season.

The overnight gDT auction was very strong with the average index increasing by 16.5% and the crucial WMP market increasing by 20.6%.  This is the third in the row and we seem to be traveling back up much more quickly than most commentators considered likely.

Fonterra structure no impediment

by Brian Cloughley

Despite recent commentary to the contrary, Fonterra’s evolving co-operative structure is both a source of significant strength and compatible with its seemingly disparate goals of maximising both Milk Price and profit.

More significantly Fonterra’s structure gives it a competitive advantage in the international market place where the bulk of its products are sold. As an industry, we forget that at our peril.

$3.85 is actually $3.30

Some are calling the announcement on Friday "Black Friday".  That is probably over the top as a price reduction was widely signaled by others.