In Focus: Dairy January 2016

Australian producers have been shielded from much tumult by a lower Australian dollar and a large and relatively stable domestic market.

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Slow recovery in global dairy prices in 2016

NAB Agribusiness is forecasting a slow recovery in global dairy prices in 2016, with ongoing support to local prices to be provided by the weak Australian dollar. Australian dairy export prices are forecast to rise 3.0 per cent in 2015-16 to average AUD 3,482/tonne, and the value of Australian exports to increase by 3.2 per cent.

International dairy markets saw a tumultuous 2015, driven by weaker global demand, particularly from China, combined with adequate supply of most dairy products.

Dave Davies, NAB’s Regional Agribusiness Manager in the Murray Valley said that Australian producers were shielded from much of the global dairy price tumult in 2015 by a low Australian dollar, and this is likely to continue in 2016.

“The AUD is already off more than 5 per cent against the USD since the start of the year and this will provide support to prices. NAB sees the currency tracking lower in the first quarter of 2016. We have revised down our AUD/USD forecasts to 0.67 in Q1 2016 (previously 0.68), climbing to 0.69 at the end of 2016 (previously 0.70). The AUD is expected to reach as low 0.66 at the end of Q2 2016.,” Mr Davies said. “Australian prices are also likely to be supported by the ongoing international interest in our products. Free trade agreements such as the China Free Trade Agreement will only help this trade, especially if we can operate on a more level playing field with the New Zealand industry.”

“Dry conditions and water prices are also likely to be key topic of conversation at International Dairy Week, but NAB’s broader outlook for dairy is very positive.

The NAB weighted dairy export price indicator started 2015 at AUD 3309.25/tonne, and after some considerable variation, ended a little higher – AUD 3351.68/tonne, and is expected to go approach AUD 4,000/tonne in the fourth quarter of 2016. NAB’s measure of dairy export prices, based on Global Dairy Trade (GDT) auction results, is weighted by the quantity of Australian exports for whole milk powder, skim milk powder, butter and cheese.

NAB Agribusiness are proud sponsors of International Dairy Week 2016, 17th January – 21st January 2016.

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