NZ retail dairy prices are falling - fresh milk is down 1.8 per cent to NZ$3.61 for two litres and cheese has fallen 8.4 per cent to NZ$9 per kilo. This is part of a global trend and global dairy prices have declined by approximately 8 per cent since last August according to BNZ agri-economist Doug Steel. While this seems like good news for New Zealand consumers, Consumer New Zealand thinks otherwise. Chief executive, Sue Chetwin claims that retail prices should be falling faster. She says that there is a lack of transparency surrounding retail dairy profits.

Dairy products getting cheaper
Radio New Zealand, 13 April 2012

Food Price Index: March 2012
Statistics New Zealand, Food Price Index, April 2012

Fonterra have announced their intention to open two more large dairy farms in China, investing NZ$100 million. Their first Chinese farm opened in 2007 and their second, called Yutian Farm One has just opened. Domestic demand for milk in China is growing by an estimated 7 per cent each year, leaping ahead of the lower than 1 per cent growth in most developed countries. At this rate Chinese consumption of milk will have doubled to more than 70 billion litres a year by 2020. Yutian One will produce 30 million litres at full capacity and with its plans for multiple farming hubs throughout the country, Fonterra intends to produce at least 1 billion litres of milk a year by 2020. Magistrate of Yutian County, Fu Zhembo described Fonterra's investment as "positive for the future development of Yutian as a dairy farming region."

Fonterra to raise milk output in China 20-fold
agrimoney.com, 12 April 2012

Two more China farms planned
Andrea Fox, Business Day, 13 April 2012

Fonterra to invest in two new farms in China
Fonterra Press Release, 12 April 2012

The UK’s milk supply continues to increase according to the latest data. The Rural Payments Agency’s provisional figures for March show 1,221.3 million litres of milk deliveries were made, 164 million litres more than February and a 4.7% increase compared to the same time last year. The UK’s cumulative milk production so far is 13.517 billion litres, an increase of 1.4 per cent compared to the same time last year and the highest since 2005/06 when it was 13.601 billion litres. This increase in supply has been caused by “A mild winter, rising milk prices, early grass growth and an increase in annual calvings” according to DairyCo.

Milk production up by 54m litres in March
Olivia Cooper, Farmers Weekly, 12 April 2012

Dairy Market Update
DairyCo, Datum, 12 April 2012

UK wholesale milk production to the end of March 2012
RPA, 12 April 2012

USDA has again revised down their projected US all-milk price to $17.25-$17.75 per hundredweight, down from $17.60-$18.20 last month. The projected price of Class III & IV milk, cheese, butter and other dairy products were also revised down. USDA attributes this to a “higher forecast 2012 milk production and weaker than expected product demand”. USDA’s projected US milk supply for 2012 is 201.1 billion pounds this month, up from 199.7 billion pounds projected in March, both of which are higher than the estimated 196.2 billion pounds produced in 2011.

USDA whacks milk-price forecast - again
Tom Quaife, Dairy Herd Network, 10 April 2012

World Agricultural Supply and Demand Estimates
USDA, 10 April 2012

Investment in Tasmanian dairy processing is rocketing ahead - but can Tasmanian farmers keep up with the growing demand for their milk? Tasmanian Dairy Products, Fonterra, and the Van Diemen’s Land Company are all investing in expanding their processing capacity, and a new dairy college is under construction. DairyTas chairman, Paul Bennett, says that "There is already a requirement for 30-40pc more milk for next season” and it may take time before new factories can operate at full capacity. On the upside, Tasmanian milk production is growing  and is predicted to increase to 800 million litres this season compared to 720 million last season. The number of Tasmanian dairy farmers is also growing and the current 440 dairy farmers overwhelmingly feel positive about the future, according to surveys.

Tasmania faces milk production challenge
Louise Preece, Stock & Land, 8 April 2012

The Australian media is rife with accusations that the supermarket milk price wars are causing milk processors to add waste products to their milk in order to save costs.

The waste product in questions, ‘permeate’, was described by The Age as “a watery, greenish waste product from the production of cheese”, and the broadsheet claims that it constitutes up to 16 per cent of some brands of milk.

Permeate, which A2 Milk chief executive, Peter Nathan, called “certainly not attractive”, can be a by-product of manufacturing either milk or cheese. Adding milk permeate is legal in Australia and the dairy industry claims that doin so is necessary in order to meet legally required levels of fat and protein. Dairy Innovation’s Martin Palmer says that the adding of whey permeate, created from processing cheese, is illegal and “does not happen in the Australian dairy industry“.

Dairy Australia's dietician Glenys Zucco has added that "The real issue here is the underconsumption of milk in Australia", rather than alleged slime content.

Waste product becomes cream of the crop in milk wars
Maris Beck & Mark Hawthorne, The Age, 17 April 2012

Dairy industry plays down permeate scare
Sarina Locke, ABC Rural, 17 April 2012

Australian milk companies exposed over waste additive
globalpost.com, 16 April 2012

Milk - a natural product
Dairy Australia Press Relese, 27 January 2012

As any cow will tell you they're far more sensible than their owners.

Fonterra is continuing on with its capital restructure plans to create the Trading Among Farmers (TAF) scheme and has named Craig Investment Partners as the Registered Volume Provider for the Fonterra Shareholder’s Market. Chief Financial Officer Jonathan Mason said that "The Registered Volume Provider will be a market maker in the Fonterra Shareholders' Market, where farmer shareholders will be able to buy and sell among themselves". Non-voting shares will also be available to outside investors and will help provide the capital for Fonterra's overseas expansion. Fonterra has also named Deutsche Bank, Goldman Sachs and UBS as 'Joint Lead Managers' for TAF. They plan to launch TAF in November.

Fonterra float to raise $500m as company pushes restructuring plan
Michael Bennet, The Australian, 13 April 2012

Fonterra Appoints Advisors for next stage of Trading Among Farmers
Fonterra Press Release, 12 April 2012

The UK’s farmgate milk price for February was 28.92 pence per litre, according to Defra, 0.04 pence lower than January and 0.53 pence lower than its high of 29.45 pence per litre in November last year. The upside is that this is still 2.84 pence higher than February 2011 when it was only 26.08 pence per litre. The average butterfat and protein content is also higher than it was during February 2011. UK and global milk production is increasing and the falling UK farmgate milk price forms part of a global trend towards lower prices throughout 2012.

United Kingdom Milk Prices and Composition of Milk
Defra, 29 March 2012

Fonterra’s proposed share plan is meeting opposition from both sides of the paddock. The proposal would allow farmers to trade shares among themselves, while still retain voting rights, and more controversially allow non-farmers to invest and receive dividends, but no voting rights. Farmers such as Lachlan McKenzie say that “trading with outside investors doesn't go down at all well". The dividends that farmers receive includes both the farmgate milk price and a value-added component, while outside investors would only receive the latter. Both farmers and potential investors say that this would create contradictory imperatives for Fonterra as what’s best for farmers (a high milk price) is contrary to what investors want (a low milk price and high value-added component). See a previous blog for a discussion of the role of cooperatives in dairy.

Farmers growing wary of Fonterra plans
Owen Hembry, NZ Herald, 10 April 2012

Problems loom over the price of milk
Tamsyn Parker, NZ Herald, 6 April 2012