Prices for butter and milk from the dairy should not increase to levels that deprive long-standing regular customers of the opportunity to buy ‘their’ milk and butter.  

“It is important to us that customers, who have been buying our products for decades, can continue to do so. Because of our values such as fairness and sustainability, many choose our products and have spent more money to do so. We do not want regular customers to have to do without it for purely financial reasons. For us, fairness also applies to our customers,” underlines managing director Bernhard Pointer. 

As a co–operative, a fair milk payment price for farmers is the basic goal. The fact that Berchtesgadener Land dairy has been at the top of the milk price table for years, is due to the trust of the customers, notes CEO Andrea Argstatter.  

The dairy was again above the Bavarian average for the 2021 milk price and once again took first place in Germany and Austria for conventional milk. Unfortunately, this position will not be maintained in the current year, as chairman of the supervisory board Anton Berger made clear: “It is more important to pay a constantly high milk price than a short-term high milk price,” he said at the general assembly. This is the only way to make long-term calculations on the farms.  

Pointner announced a further increase in the milk price for the current year, which has been gradually increased by €0.04 ($0.04)  since 2021. The managing director also says, “We will not lead the dairy out of this crisis safely by paying the highest milk prices alone: ​​the dairy needs the farmers as the most important suppliers of raw materials, but also the customers for the purchase of our branded products. And one thing is clear: we only have a chance, if both remain loyal to the co–operative. Each of us is paying for this war and no profession, no individual will be spared.” 

The post The Berchtesgadener Land dairy’s general assembly looks at economics appeared first on Dairy Industries International.

Compared to the previous month, it increased by 2 eurocents to €056.3 cents/kg. At the same time, the previous year’s value was exceeded by 23.4 cents, reports the ife Institute in Kiel.

The upswing in the prices for butter and skimmed milk powder was decisive for further increases in the value of raw materials. Both products were in high demand and only available in limited quantities.

According to calculations by the ife Institute, the average German butter price rose by €5.10 to €590.40/100kg in February 2022. Prices for skimmed milk powder rose from €18.80 to €365.40/100 kg.

The raw material value determined monthly by the ife Institute in Kiel applies to standard milk with 4% fat and 3.4% protein from the milk producer’s farm and without VAT. The basis for calculation are the average market prices for butter and skimmed milk powder based on the listings on the southern German butter and cheese exchange in Kempten.

The raw material value does not therefore correspond to the price paid by a particular dairy, but it does provide the direction and scope for the development of raw milk prices to a certain extent.

The post Dairy materials prices up in Germany appeared first on Dairy Industries International.

At present, the global dairy markets have not yet fully factored in the implication of such an invasion, so despite the current high dairy price levels, a further increase is possible. Ukraine and Belarus are net suppliers of dairy products to the global marketplace, while Russia is a net importer.

‘Panic buying’ in the global dairy market, resulting from an overnight loss of Ukrainian and Belorussian exports, may trigger further price increases, even when only moderate volumes are being traded. In the UK, farmer pressure on the UK processors to keep pace with global raw milk price increases is likely to build.

Despite ever higher milk prices, farm milk production may not respond, or may even contract, as energy prices rises lead to on-farm cost-of-production increases that may outpace milk returns, certainly in the short-term. Farm output growth that could somewhat dampen dairy price increases is, therefore, unlikely to happen in the short term.

UK dairy processors will face the effects of higher energy prices on their milk purchasing costs, their own operating costs, and on consumer buying power. A further increase of energy prices will drive up consumer inflation even further, hitting consumer buying power. Consumers are already clearly feeling food price inflation and retailers know this. This may impact on demand, and so UK retailers are likely to be highly resistant to further dairy price increases.

As a result, selling to global dairy commodity markets will potentially become even more attractive to those processors that have that option. Evidence of selling options in foreign commodity markets may be needed for UK retailers to be willing to accept further price increases from processors, which will be required to maintain UK milk supply if farmers are under further cost of production pressure.

Should this situation escalate, it will be important that UK dairy processors are able to increase sales prices even faster than they have been in recent months, to enable them to cover their own additional cost inflation and to be able to pass on higher income through milk price to farmers to cover further on-farm cost increases.

As a result, inflation of consumer dairy prices in the UK seems an inevitable consequence of conflict between Russia and Ukraine, due to the arising impact on global dairy markets.

For further information ,visit: www.kiteconsulting.com

The post Ukraine war impacts world dairy markets appeared first on Dairy Industries International.

The annual Kiel raw material value is in 2021 at €0.39/kg and thus 26% higher than in 2020. In the case of milk producers, the IFE Institute estimates an average value of around €0.36/kg milk for 2021, which is 10% over the 2020 prices.

Despite the nominal price development for producers, the expectations of many dairy farmers remain lowered income because of the significantly higher production costs. Even in milk processing the cost has increased, so that only rising and sustainable prices for dairy products can stabilise the situation, states IFE.

For the first few months of 2022, it can be expected that butter and skimmed milk powder costs will still be at higher levels. Further improvements are conceivable, and this is driven by the higher prices of both butter and skimmed milk powder.

Cheese prices must continue the increase, so the cheese manufacturers can compete with the raw milk price. Cheese producers make use of over half of the milk delivered in Germany.

A large proportion of cheese production is traded in longer-term contracts, where the agreed prices are not exposed to fierce short-term fluctuations such as the markets for block butter and other dairy industrial products.

On the other hand, these delays then benefit the milk producers, when markets come under price pressure. The same applies to the consumer milk and the fresh assortment whose revenues are still behind the other evaluations.

The most violent short-term fluctuations are revealed on the spot market for liquid raw materials such as tank milk, skimmed milk concentrate and tank cream – products that are predominantly sold between dairies and partly also between dairies and other branches of the nutritional industries.

The raw material shortage has led to stretching of the operation of many contracts, especially in milk powders and cheese. As a result, the holiday-related overhang is likely to be quite desirable to strengthen the thin supply chains through more storage.

Since September 2021, dairy deliveries in Germany were first 2.5% and now 3% behind the same period of the previous year, and has stagnated more or less since 2019. Unlike other years with lower milk production, the seasonal low in late autumn shows no signs of weakening but rather is a continuation until the spring.

The year 2021 is estimated to see milk supplied to German dairies reaching almost 32 million tons, which is 0.5 million tons less than in 2020.

At the beginning of November 2021 (according to Destatis) there were 3.83 million dairy cows in Germany, which was 2.3% less than in 2020, and unlike in the years before the medium milk yield per cow has barely risen, possibly even slightly fallen, which has to do with the difficult basic food situation and increased prices for power. This indicates a phase of structural change, according to the institute.

The post Raw material costs rise in Germany appeared first on Dairy Industries International.

The post Dairy market prices heavily dependent on import demand from China appeared first on Dairy Industries International.

From January to June 2021, solid import demand from Asia, mainly China, underpinned the increase in international dairy prices during the period. In China, the fast pace of economic growth and the real appreciation of the RMB induced a surge in consumption, leading to higher dairy imports. In addition, the rapid recovery in China’s pig herd population boosted higher imports of whey powder. More home cooking and baking during lockdowns increased retail sales such as butter and cheese in many dairy importing countries, partially offsetting lower food services sales. Import purchases by some countries in the Middle East and North Africa also increased, supported by revived petroleum prices, improved economic activities, and increased inbound movement of expatriate workers. In recent months, demand for spot supplies from Oceania has risen sharply due to concerns over short-term sourcing challenges amid limited container availability in Europe and North America, the FAO says.

Supplies saw a change, with heatwaves and dry weather in Australia and New Zealand making declining milk production increase and driving up milk prices. Meanwhile in Europe, cold weather made trucking more difficult and milk deliveries to processors as a result, which led to higher international prices for butter and milk powders.

For further information, visit fao.org/3/cb5635en/cb5635en.pdf.

The post UN FAO reports on international dairy prices appeared first on Dairy Industries International.

“The positive developments on the foreign markets must not be withheld from the domestic dairy farmers due to the effects of the highly concentrated market situation in Austria, while at the same time massive cost increases and additional costs for higher quality standards have to be dealt with,” says the VÖM president.

According to surveys by Statistics Austria, exports rose by 1.8% in the first quarter of 2021, while imports fell by 10%, which led to an improved foreign trade balance.

In the case of cheese, the most important foreign trade product, reduced import volumes with lower prices can be observed, while export volumes increased with stable prices.

There is currently positive news for the Austrians of an overall good market development on the international markets, and products with higher Austrian quality standards are in demand abroad.

The lack of sales to gastronomy and tourism has hit Austrian dairies hard, but the long closures are also likely to be responsible for the decline in imports of simple goods for gastronomy and tourism.

For Petschar, this different development is a clear signal that the milk market is suffering from a structural imbalance.

“It cannot be that additional expenses for higher quality and cost increases at home are not compensated, so the honest quality efforts of the Austrian dairy farmers and dairy industry do not find the appropriate compensation due to the market conditions, although these higher, domestic quality standards and a secure self-sufficiency everywhere – both demanded by our consumers – are ignored by retailers as well as by political decision-makers,” he says.

The post Price pressures cause concern in Austrian market appeared first on Dairy Industries International.

The rise during January to May was primarily driven by limited availability of exports from Oceania in the face of strong global import demand. Dry weather conditions in Oceania, especially in Australia, led to poor pasture quality and water scarcity. Unusually high temperatures during the summer months in Europe also reduced the pasture quality and the availability of animal feed, moderating milk production expansion.

Across the key global regions, Asia registered the largest expansion, followed by Europe, North America, South America, Africa, Central America and the Caribbean, but declined Oceania.

In dairy products, the annual average value for SMP registered the highest year-on-year increase (32.7%), followed by those of cheese (7.8%) and WMP (3.8%), partially offset by a decline in butter prices (-15.7%). SMP prices increased, although its average value remained low compared to other dairy products. Firmer prices in 2019 were mostly driven by strong import demand ,while supplies were tight, especially from the European Union, where slow growth in milk deliveries forced producers to limit spot supplies in order to fulfil long-term export commitments. Oceania’s exports rose but was not adequate to contain price increases.

Cheese prices too strengthened, especially in the first half of the year, reflecting seasonally limited export availabilities from Oceania, as well as the European Union, with strong import demand from Asia. Cheese prices fell from June onwards as global export availabilities improved.

WMP prices also increased in the first months in 2019, followed by a period of weakening, mostly on recovery in export availabilities in Oceania; in tandem with the region’s seasonal production cycle. Limited export supplies from Europe during that time also lent support to prices. Despite high optimism for a significant rise in WMP exports with weather conditions in New Zealand becoming favourable for milk production, milk production started falling faster than had been anticipated, resulting in higher prices towards the end of the year.

By contrast to other dairy products, global butter prices fell significantly in 2019 (by 15.7%) on mounting supplies in Europe, Asia, Oceania and South America, notwithstanding some declines in North America. Contributing to the downward pressure on butter prices, import demand also stayed weak in 2019, especially from Asia and some countries in South America and Africa.

In Asia, milk output in 2019 increased by 10 million tonnes, or by 2.9% from 2018, to nearly 360 million tonnes, with over 90% of coming from India and Pakistan. India’s milk production continued to increase driven by rising demand, induced by high demand for processed food stemming from fast growing urbanisation. Production growth is facilitated by rising milk collection and processing, especially by dairy co-operatives, along with rising output of relatively more organized sector that adopts modern output expansion methods such as artificial insemination. Pakistan is the fourth largest milk producer in the world and, in 2019, its production is estimated to have expanded further by about 3%, mostly due to rising dairy cattle numbers, but also due to rising dairy cattle population. China’s milk output increased further in 2019, following a rebound already in 2018.

For further information, click here.

The post Dairy prices up in 2019, says FAO appeared first on Dairy Industries International.

Eurostat has recently compared the average food price levels in each EU country, with Austria having a value of 125% of the EU average food price level, and the value of milk and dairy products being significantly lower at 107% of the EU average.

Closer analysis shows that national prices also depend on the average income and thus labour costs and purchasing power parity of a country.

Austria’s average disposable income per capita (127%) is well above the EU average, meaning that Austrians only need to spend a smaller percentage of their income on high-quality dairy products, as confirmed by an analysis of purchasing power parity, which is 23% cheaper for dairy products in Austria than the EU average.

Not counted into such price comparisons are the above-average number of discounts in the Austrian food trade. Furthermore, there are no explanations to who receives which share of these retail prices.

Particularly annoying to VÖM in such comparisons is that not all quality differences are addressed, as the Austrians are proud that their dairy products are known for being GMO-free, have the highest organic content, are produced in mountain and disadvantaged areas, have regional processing and thus are subject to far higher quality standards than in other countries – all that is not included in the price comparisons.

“The bottom line is that Austrian dairy products are very cheap for our consumers, they offer the highest international quality standards and, in addition, the dairy industry provides other essential services for the state. However, in order to receive all this, it is necessary that these services be better compensated,” Petschar states.

The post Austrians pay for better dairy appeared first on Dairy Industries International.

Eric Morrison, head of risk and commercial solutions at NZMP said the new solutions are designed to remove complexity and reduce supply risk for NZMP’s dairy ingredients which are sold in more than 130 countries.

“External and often difficult to predict factors such as weather events, supply chain disruptions, and geopolitical events can impact supply, demand and pricing. We wanted to provide our broad customer base with options to reduce complexity and take back some control,” said Morrison.

“Over a number of years, and with plenty of customer feedback, we have developed a range of market-leading solutions. Each is intended to reduce the distraction and noise which volatile markets can bring, and that’s what we’re hearing. Our solutions are supporting many of our customers achieve their priorities and focus on what they do best.”

NZMP recently showcased its four hero Risk and Commercial solutions at Gulfood in Dubai and Food Ingredients China (FIC) in Shanghai receiving plenty of interest and positive feedback from the industry.

Morrison said: “At these world-leading events we received a lot of interest in our refreshed NZMP solutions. The continued market volatility and uncertainty is driving a growing awareness of the potential benefits of price and supply risk management and we are excited to be able to provide options to our customers to help support their business operations and planning.”

Mr Morrison said NZMP’s local sales teams work closely with customers to understand their objectives and how NZMP’s solutions can best support them “We also have a specialised Risk and Commercial Solutions team who are based out of Singapore, the Netherlands and New Zealand and who are available to discuss options with customers.

The post Customers gain confidence through improved price and supply certainty appeared first on Dairy Industries International.

The post Emmi reports improved sales in first half of 2018 appeared first on Dairy Industries International.

Let us hope that is true. Preparation in the good times will make it easier when the bad times inevitably return. As we know too well with farmgate prices, what goes up will go down. But in the meantime, let’s enjoy the bounce.

Meanwhile, I have received what is another sign of the times in the email today – a pdf ticket for the Dairy UK annual dinner, versus the usual, bring your card along and wave it at someone. A combination of recent terror-related events in London and possible protests by vegan activists at the hotel has made such measures necessary.

I feel badly that we can’t do without these items, but understand that we live in difficult times. For the first time ever, I went to a concert in central London the other night, went through metal detectors and was searched properly before entering. It was reassuring, at least.

The only good thing is that we all know that London and the UK have been through such things before, and that we can get through them. It is a terrible thing to be have to be good at, but there you have it.

The post Signs of the times appeared first on Dairy Industries International.

This one voice can be very helpful. As we have seen in the past, if there is a unified vision, the public and government respond to it. Infighting between processors and farmers gets us nowhere. As many companies are made up of farmers, it is also decidedly counterproductive. A united front is easier for government ministers and people of influence to understand and to react to.

Another item is that as an industry, we mustn’t let any governmental indecision and noise become our own. The industries that do best will adjust quickly to the new landscape and hopefully will see benefits to this uproar. In some ways, the dairy industry is well placed to do that, as we have had to deal with price volatility on a landmark scale over the past several years. We know we can ride tumultuous waves, and let’s not forget that dairy prices are on the upswing now. Big waves are good surfing for those who know what they’re doing.

The post Time to get serious about leaving appeared first on Dairy Industries International.

Most of the domestic demand growth is for cheese and butter. Therefore, the spread in prices across the dairy complex stocks will remain wide, with demand for butterfat driving the market and surplus protein, including European stocks, weighing on the market, according to the Quarterly.

Kevin Bellamy, Rabobank global dairy strategist, says, “Milk production around the world in second half of 2016 is in poor shape. Europe’s production has tightened, not only due to low prices, but also in response to the efforts of the European subsidies, which – if farmers deliver on their commitments – should remove a million tonnes of milk from the market. Meanwhile, we’ve seen poor production in Oceania, with New Zealand missing last year’s peak production levels by 6%.”

Meanwhile, the current price rally has further upside to come, as milk supply growth across the export regions will take time, despite improving milk prices. Prices across the dairy product matrix will diverge, driven by higher butterfat demand and surplus of protein stocks.

Significant recovery of production and volumes available for export will be delayed until the second half of 2017, as the new Oceania season commences. Another key item is that China will return to the international market, and Rabobank forecasts its imports to rise by 20%. However, further strengthening of the US dollar, combined with rising commodity prices, will challenge demand from other key importing regions.

The post Supply drop starts to bite, says Rabobank appeared first on Dairy Industries International.

Butter prices are back to the back to the 2012-2013 price level, and cheddar is higher than last year at €308/100kg, but still around 15% below previous levels. WMP is now €258 per 100kg, which is the same level as 2014, but this is still 20% below the levels of 2012-2013.

Based on SMP and butter prices, the EU milk price equivalent started rising in May and reached €30/100kg in September, while the EU average raw milk price started increasing in August only to the low level of €26.40 per 100kg. Dairy product prices are more volatile than milk prices and in times of crisis decline faster and deeper, the report says.

The magnitude and duration of the recovery in EU dairy prices remain uncertain, as well as the extent of the milk price recovery, it notes. Rising world import demand for cheese and butter and strong import growth in China, the US, Philippines, Mexico and Russia is influencing world prices as well. Domestic cheese and butter consumption is also helping growth in the EU, offsetting declining liquid milk sales. EU supply has dropped since June and additional reductions are to be expected, and declines in Uruguay, Argentina and Australia have also aided the increase.

However, there are large quantities of SMP in public and private stocks, equivalent to about one-third of EU SMP production, and increased US and New Zealand forecasts may influence prices in the future, it notes.

The post EU predicts price recovery for dairy appeared first on Dairy Industries International.

But overall, I predict a good two weeks ahead, no matter what the milk price does. It’s the Rio Summer Olympics after all. Despite the predictions of pollution in the water, and venues not being ready, it is going well for some and not so well for others, and it is all pretty gripping viewing. And Rio does look nice on television. I have visited Sao Paolo, and if Rio is half as welcoming as that city, people will be really enjoying themselves.

I also offer Olympic tennis as a reproof to those golf professionals who opted out of Rio 2016 due to the Zika virus (which interestingly has hit Florida now, where a lot of these pros live). Novak Djokovic, the world’s number one tennis player, cried when he crashed out at the Olympics yesterday in the men’s singles. Because the Olympics matter.

I also will argue that tennis players are on the road as much as golfers, and yet, there is no major tennis player who is not in Rio because of Zika. Indeed, the Murray brothers and the Williams sisters, arguably a set of siblings who command quite a high net worth between them all, were proudly in attendance representing their countries.

So, maybe we can get rid of golf for the next Olympics. Just a suggestion.

The post Off the bottom appeared first on Dairy Industries International.

In the UK, First Milk has joined other processors in increasing its farmgate prices going forward. First Milk is a co-operative that has had its fair share of troubles in the recent past, but it appears to have gotten its ship in order and the sailing is looking fairer for it than in recent years. Exporters also appear to be doing well, with the UK’s Somerdale International reporting strong growth in all its core export markets. It seems companies are doing well looking to the US, particularly as the pound remains weak against the dollar. That being said, investment in infrastructure also appears to be paying off with improved returns at Somerdale.

This week was also devoted to happiness on the part of cheese makers winning awards at the International Cheese Awards at Nantwich. The record 5,000 entries saw Dutch company Treur Kaas collect the Champion Overseas, Supreme Champion and the Westminster Cup 2016 for its aged Jerseyhoeve Schorren. Many congratulations are also offered for Nigel Pooley, who won the British Cheese Board industry award at the show. It was another glorious trip to a field in Cheshire to eat some wonderful cheese.

The post After the darkness appeared first on Dairy Industries International.

Q: How did you come up with the summit’s theme, “Dare to dairy”?

One of the first things we looked at is the theme for the summit, and one of the key issues is how can dairy feed nine billion people by 2050 in a responsible and sustainable way? That is why the motto was chosen of “Dare to dairy.” There are a number of goals relevant to the idea and contributing to feed a growing world population.

We see our contribution to feeding the world as a challenge, and the other side of the coin is to limit the footprint of dairy production. A third aspect is to think outside in a larger context, and not just about the dairy sector. We’ve invited some keynote speakers from outside the industry, such as Jay Sinclair from the World Wildlife Fund to discuss the footprint of dairy production. We are asking them to challenge us and to be there, not just to agree, but to challenge participants and provide us with other news about how the sector operates, with a professional moderator at the sessions.

There will also be a plenary “dare to dairy” sessions, such as the one on Tuesday 18 October, which is titled, “Why not use a total vegetable diet?’ Threats and opportunities related to plant based diets.” Another session will look at whether the dairy footprint is too high or not.

Q: How have you set up the summit?

We have made this a condensed three-day summit, which usually attracts 1,500 to 2,000 participants from all over the world. Amongst them are not only CEOs and employees of dairy processing companies, dairy farmers, suppliers and scientists but also stakeholders from outside the global dairy sector. They all will share their view on how dairy can sustainably contribute to feeding nine billion people.

Q: What other offerings will there be?

We are offering nine technology tours to see firsthand the dairy scenarios in the Netherlands. They will be offered on the Thursday and Friday of the summit in order to not compete with the programme itself. These will include visits to DSM in Delft, the Netherlands and Yakult, to name just a couple. FrieslandCampina’s innovative dairy process and product innovation centre in Wageningen is another tour, which is coupled with a visit to research outfit Nizo in Ede.

Q: How has the dairy industry changed over the past few years in Europe and how will the conference address this?

We live in an era with very low dairy prices, from very high prices only a few years ago. The European dairy sector has high price volatility and we have a specific programme on this, seen from outside the industry, which will talk with people from the energy sector about its coping mechanisms.

Also new is sustainability and diets, which has gained pace in the last few years in dairy. The FAO is organising a session on anti-microbial resistance, which is important. In the Netherlands, our dairy farmers have reduced their penicillin use by 47 percent, which is a huge result. The session will address the need to reduce anti-microbial drugs in farming. Another session is looking at the future of dairy production, and how it will grow in Asia and Africa.

Q: How busy has the organising team been?

We have been very busy with our normal work and on top of that, the work for the summit. There is a lot to organise and to think of. There are a lot of meetings and emails. It’s not just work in the office, there is a lot of work behind the scenes. There are eight people on the organising committee, and another eight people on the programme committee, setting the content of the summit programme. We started working on it two years ago, and there is more work to come.

Q: How did you select the venue for the summit?

The venue, De Doelen is a state-of-the-art conference venue and concert hall, and was chosen because it is easy to reach from wherever the international participants are coming from. It is half-hour by train from Amsterdam airport, and only two hours and 15 minutes by fast train from Paris. It is also a five-minute walk from Rotterdam’s railway station.

Q: Anything else you’d like to add?

The early bird registration has been extended to 15 August, and those registering before then will be able to do so for €100 less than the usual fees.

For further information, please visit www.idfwds2016.com

The post Where dairy dares appeared first on Dairy Industries International.

Chairman John Wilson says that the supply and demand imbalance in the globally traded dairy market has brought prices down to unsustainable levels for farmers around the world, and particularly in New Zealand. The strong New Zealand dollar has also had a negative impact on the milk price.

“The low prices have placed a great deal of pressure on incomes, farm budgets, and our farming families,” says Wilson.

“Our priority is to generate more value out of every drop of our farmers’ milk by focusing on the areas within our control. We aim to efficiently convert as much milk as possible into the highest-returning products. Our management is aware of the need for strong performance to ensure that we get every possible cent back into farmers’ hands during a very tough year,” he explains.

“We have lifted profitability from last season to this season, resulting in higher earnings per share to help offset low global dairy prices. As a result, we have delivered an interim dividend of 20 cents per share, up from an interim dividend for last year of 10 cents per share.

“Our forecast Farmgate Milk Price of $3.90 (€3.50) per kgMS reflects low global dairy prices, with Whole Milk Powder decreasing around 17 per cent this season to date. Forecast total available for payout of $4.35 (€3.90)-$4.45 (€4.0) per kgMS currently equates to a forecast cash payout of $4.30 (€3.85) per kgMS after retentions for a fully shared up farmer.

“Our forecast total dividend for the current financial year is 40 cents per share. The Board has today declared a 20 cent dividend which will be paid in April. We intend declaring the remaining 20 cents per share in two dividends of 10 cents in May and 10 cents in August to help support farmers at a time when cash flows are extremely tight,” he concludes.

Chief executive, Theo Spierings says the Co-operative’s strong performance reflected a sustained effort in three main areas.

“We focused on the efficiency of our ingredients business and capturing demand for ingredients in a wide range of markets. We aimed to make the most of global consumption growth by building demand for higher-value products in our consumer and foodservice markets. Our working capital has improved significantly, and our inventory levels are lower than in recent periods for this time of year, down 9 per cent in volume terms due to strong sales,” he says.

Free cash flow for the six months to 31 January 2016 was $2.1 (€1.8) billion higher than the first half last year, with gearing at 49%, down from 51% in the previous year.

“Finally, we maintained strict financial discipline to keep lifting our return on capital and our strong cash flow has enabled us to strengthen the Co-operative and reduce gearing,” explains Spierings.

“Ingredients achieved normalised EBIT of $617 (€552) million, up 27% compared to the first half last year. This resulted from improved product mix returns, and the increased production and cost efficiencies coming from our investments in plant capacity in New Zealand.

“In consumer and foodservice we have delivered very good growth, with normalised EBIT increasing 108% to $241 (€216) million. We remain focused on growing demand, especially in the eight markets where we currently hold or want to gain leadership or a very strong position: New Zealand, Australia, Sri Lanka, Malaysia, Chile, China, Indonesia and Brazil. These are well established markets for Fonterra, so we are working off a strong base.

“The additional 235 million litres of milk we converted into higher-returning consumer and foodservice products in this six month period built on the additional 600 million litres last year. Our farms in China are a key part of our integrated dairy business. We are achieving operational efficiencies on the farms which are helping offset the current low domestic milk price in China,” he concludes.

Current global economic conditions remain challenging and are impacting dairy demand and prices, said Spierings.

“The balance between available dairy exports and imports has been unfavourable for 18 months following European production increasing more than expected and lower imports into China and Russia.  This imbalance is likely to continue in the short term, with prices expected to lift later this calendar year.

“The long term fundamentals for global dairy are positive with demand expected to increase by two to three per cent a year due to the growing world population, increasing middle classes in Asia, urbanisation and favourable demographics,” he explains. The business will continue to work on capturing demand and margins in the second half of the year, just as it did in the first half, by focusing on our consumer and foodservice volumes and those of specialty ingredients. We remain firmly on track to achieve our forecast earnings of 45-55 cents per share, ahead of the 40-50 cents per share we indicated at the commencement of the season.

“Our net debt is $6.9 (€6.2) billion and we are expecting this to reduce significantly in the second half of the year. We are on track to reduce gearing to 40-45 per cent by the end of the current financial year,” he concludes.

The post Fonterra announces 2016 interim results appeared first on Dairy Industries International.

When combined with the forecast earnings per share range of 45-55 cents, this means a total forecast available for payout of €2.66-€2.72 per kgMS and would currently equate to a forecast cash payout of €2.60-€2.63 per kgMS for a fully shared-up farmer after retentions.

Fonterra is forecasting its New Zealand milk production to be at least 4% lower than last season as New Zealand farmers respond to the ongoing low prices by reducing herd size and feeding significantly less supplementary feed which is expected to have an impact on this Autumn’s production.

Chairman John Wilson says difficult conditions in the globally traded dairy market have put further pressure on the forecast.

“This further reduction in the forecast Farmgate Milk Price is the last thing farmers want to hear in what is proving to be a very challenging season. At times like this the business needs to do everything it can to drive every last cent back to farmers.

“Management is fully focused on reducing cost and generating cash right across the business. The continuing lift in financial performance and our balance sheet strength will provide opportunities to support our farmers’ cash flows. We will provide an update on this at our interim results on 23 March,” says Wilson.

Chief Executive Theo Spierings says dairy exports and imports had been imbalanced for the past 18 months due to European production increasing more than expected, and lower imports into China and Russia, the two largest importers of dairy.

“The time frame for a rebalancing has moved out and largely depends on production reducing, particularly in Europe, in response to these unsustainably low global dairy prices.

“The long-term fundamentals for dairy are positive with demand increasing at over 2% a year due to the growing world population, increasing middle classes in Asia, urbanisation and favourable demographics.

“Our forecast is based on no significant changes to either supply or demand globally before the end of the year. However, a reduction in the supply available for export before then could mean prices recover earlier than currently expected,” explains Spierings.

The post Fonterra revises milk forecast appeared first on Dairy Industries International.