How is the dairy sector in Oceania?

Oceania is in the summer period, unlike the Netherlands, where winter time has recently started. Seasonally speaking, the milk supplies therefore run in the opposite direction. While the Dutch milk supply is at an all-time low, the milk supply in New Zealand and Australia is at peak production in the current month of October. 

Despite the global corona crisis, the mood in the dairy market does not appear negative. The milk supply of both countries is growing steadily. With this, the countries continue down under, because the milk supplies also managed to do it in August surpassing last year's level.

Dairy export
Not only is milk production increasing, but dairy exports are also significantly higher in August than last year. The figures from Dairy Australia show that in total no less than 13,9% more dairy products are exported. The largest percentage increase is in the export of butter, which increased by no less than 61,1% to 2,521 tons. Skimmed milk powder and whey powder are also exported more than last year and are approximately 27,4% and 20,6% higher. Not all products individually are exported in large volumes. Cheddar and whole milk powder show a decrease of 13,2% and 13,9%.

GDT positive
The average price on the Global Dairy Trade (GDT) in New Zealand has increased in value over the past 3 auctions. At the last auction the increase somewhat more modest than in previous editions, but the dairy farmers are positive about the developments.

Dairy processor Fonterra announced that it expects the so-called Farmgate milk price to increase by more than 6% to $6,80 (NZ dollars) per kilo of milk solids. BNZ and Westpac are also following Fonterra's initiative and are raising the expected milk price for the season to $6,80 and $7 per kilo of milk solids

Chinese demand is growing
This increase is based on an increasing demand from China for dairy products, especially the whole milk powder, according to business economists from the sector. According to them, the Chinese economy has recovered relatively quickly after the coronavirus outbreak and is on track to show modest growth this year. The corona crisis was previously expected to put a lot of pressure on global demand for dairy products, but China and other Asian countries are reportedly doing better than expected.

Despite the positive developments, it is difficult to estimate whether sentiment in the dairy market in Oceania will remain so rosy. The milk price for the season is good and it coincides nicely with the peak in spring production. But the uncertainties surrounding the corona crisis are not abating and the sales developments on this front could quickly turn the situation around.