The strength of global dairy markets has put a smile on the face of Oceania dairy farmers ... but not for long. In the tradition of the normal farmer mindset we can already hear calls of anguish over the weak US economy and the effect this is having on the US dollar exchange rate.

In his blog this week Dr Hauser takes a look at the impact of exchange rates on the Xcheque milk price indices for Australia and New Zealand. There's no reason to panic yet but watch out for further downside in 2011.

This week Fonterra announced their final result for the 2009/10. There were no surprises there for farmers - the total cash payment of $6.37 / kg MS was as forecast back in April. The final distributable profit was a slightly higher than expected and Fonterra have taken the opportunity to use this to reduce their debt burden - moving their gearing ratio from 53% in the prior year down to a much healthier 45%.

The news that did take my eye was the reaffirmation of the forecast for 2010/11 at $7.00 - 7.10 / kg MS. I had to put my glasses on and read the press release twice to find out what Fonterra was really saying. That made things a little clearer but it does seem that a little bit of magic dust has been sprinkled on the New Zealand Dairy Industry. Here's a few thoughts on how the trick is done.

Dairy Australia published the July figures for Australian milk supply last week and the news was positive. July milk production jumped 3.2% on the prior year and more than 4.4% in the important dairy production centre of Victoria.

If you were puzzling over what this was signalling for the coming year then it is a reasonable bet that you are not alone. But don't fear, here at Xcheque we are on the case and can give you some insight into the long term trends and prognosis for 10/11.

A recent posting on the email forum Ausdairy-L raised questions about the fairness of three year contracts for milk supply. Contracts are not new to the industry but they are unusual. In the past the majority of processors have opted for handshake agreements. Times are however changing. Ongoing reduction in milk supply has resulted increased competition for suppliers. Furthermore, the low prices of the past 18 months have prompted supplier transfers in numbers that we haven?t seen for a long time. Changing processors is a tricky issue for the industry but here is a view on what needs to be considered.

(This article was first published in the August 2010 edition of the Australian Dairy Farmer Magazine)

Like fine wine, good ideas take time to develop. That is certainly the case with Xcheque's third law of economic gravity. It needed a little maturation time before we uncorked the bottle.

But here it is! Dr Hauser has found the time to put fingers to keyboard again and reveal all.

Xcheque's Third Law deals with the question of supply and demand - fundamentals of economic systems until it all goes wrong and somebody gets poked in the eye.

A common theme in discussions with our dairyfarmer clients is the incredible volatility that the industry has seen in farmgate milk price and raw material costs in the past three seasons. The questions that keep coming up are "Why can't we achieve a stable price?" and "... is this here to stay?".  In this article Dr Hauser discusses the volatility question further. 

This article was first published in the July 2010 edition of the Australian Dairyfarmer Magazine

It's interesting to see what can happen when you put a reasonable milk price and lower feed and fertiliser costs in front of dairy farmers.

While Xcheque has been busy rebuilding our website, dairy farmers around the world have been increasing milk production (at an alarming rate).

This week I thought our readers might like to catch up on the latest data for EU, USA, and Australian Milk production.