Fonterra milk intake falls 22pc as Australian market tightens

Fonterra's droughty milk intake down 22pc for first quarter

Agribusiness
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Drought and intense competition for milk hurts Fonterra's intake volumes

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Trans-Tasman dairy giant, Fonterra, says high farm input costs, poor seasonal conditions and declining herd numbers continue to sap its milk business in Australia.

Milk collections in September were down 15.2 per cent on the same month last year, while receivals for the first quarter of 2019-20 have dropped 22.1pc on the previous season.

The tough summer weather forecast was not offering much confidence of improved farming conditions or milk output, either.

The New Zealand dairy behemoth also echoed comments from local rival, Bega Cheese last week, reporting in its latest global dairy update "intense competition for milk is impacting on Fonterra's milk supply".

While it said milk collection in NZ lifted marginally to 309 million kilograms (milk solids) for the first three months of the season, in Australia receivals were down almost a quarter to total 23.2m kilograms

Spring-summer forecasts are for well below average rainfall and we above-average temperatures across the majority of Australia, which will continue to pressure milk production if the seasonal forecast materialises - Fonterra Global Update report

Fonterra noted Dairy Australia had forecast another year of declines for milk production of about three to five per cent in 2019-20.

Australian production for the 12 months to August fell more than 6pc on the previous corresponding period, while NZ output was about 1.2pc higher, the US up marginally (0.3pc), and the European Union was flat.

"The Bureau of Meteorology spring-summer forecasts are for well below average rainfall and we above-average temperatures across the majority of Australia, which will continue to pressure milk production if the seasonal forecast materialises," Fonterra's global outlook reported.

In Europe, despite significant increases in production from Britain, Ireland and Poland, large volume declines were recorded from herds in Italy, France and the Netherlands.

Across the global industry the update observed strong growth in dairy exports from NZ and the European Union, but declining monthly trade from Australia and the US.

Aussie exports still up

Interestingly, despite Australia's 6pc drop in its August results against 2018, the year-to-date export figures rose 3.5pc (26.6 tonnes) for the 12-month period.

Milk, butter and infant formula were the main drivers of growth - up a combined 63,131t, while cheese and whole milk powder exports slipped 33,350t.

Fluid milk and infant formula demand led a rise in China's total imports from around the world in August - up almost 5pc (12,000t), with import increases for the year to August almost cracking 10pc.

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Latin America has also been consuming more dairy imports - up 3.6pc for the year to July 30, with July volumes rising almost 10pc thanks to strong purchases of fluid milk and milk powder.

Asian imports (outside China) were up 5.1pc for the year to July, although down 1pc in July, while Middle East market imports fell about 6pc in the year to July, and 4.5pc in July.

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The story Fonterra milk intake falls 22pc as Australian market tightens first appeared on Farm Online.

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