Oceania Dairy Market Overview

MADISON - Aug 17/06 - SNS -- The USDA published its latest review of dairy market conditions in Australia and New Zealand today.

OCEANIA OVERVIEW:  The new milk production season in Oceania is just beginning
to resume.  Output in New Zealand is showing more signs of increases versus
Australian production.  The New Zealand milk output season is typically a
month or so ahead of production in Australia.  New Zealand milk producers and
handlers indicate that volumes are increasing, but state that it is still too
early in the season to report comparables to last year.  Winter weather
conditions in New Zealand have been typical.  Pasture growth is progressing
fairly well.  Moisture during the winter season has been favorable with
rainfall and snow cover reported to be good, although temperatures are cooler
that usual for this time of the season.  In Australia, milk producers indicate
that rainfall during the winter season was lighter than desired for July, but
is improving in August.  Shipments of inventoried product from the 2005 - 2006
year continue.  Carry over volumes are reported to be adequate for the next
month or so, until new product is available and new commitments are filled.
Some Oceania traders and handlers are wondering what impact unshipped New
Zealand butter stocks, earmarked for clearance to Europe, might have on
Oceania prices.  Since the total suspension, The European Commission has made
concessions to the initial suspension to allow butter with existing
certificates and/or already in transit to enter the EU under regulations prior
to the July 12 date.  Subsequent shipments of butter volumes earmarked for the
EU not falling into the concession category are now on hold until new rules
are drafted.  Reports indicate that these new rulings might not be finalized
until October.  Traders outside of New Zealand are now speculating what will
happen to these unshipped volumes.  Some feel that these volumes will need to
clear New Zealand warehouses soon as the 2006 - 2007 butter production season
will begin entering warehouses.  Outside of these potential surplus volumes,
Oceania traders and handlers indicate that they will be basically cleaned out
of product prior to new production.  In most instances, handlers state that
they will have minimal, if any, volumes of manufactured dairy products
available for spot buyer interest.  Powder stocks are in very close balance.

0930c steve Schneeberger  (608)250-3204

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