Oceania Dairy Market Overview

MADISON - Dec 21/06 - SNS -- The USDA published its latest review of dairy market conditions in Australia and New Zealand today.

OCEANIA OVERVIEW:  The Oceania milk production season continues to decline at
varying rates.  In New Zealand, seasonal production projections of 1/2 - 1%
above last season remain unchanged, although reports indicate that this could
quickly disappear especially if El Nino weather patterns influence weather
conditions.  Current conditions in New Zealand have some dairy regions dealing
with colder and wetter conditions than usual for this time of the year, while
other dairy regions are experiencing dry conditions due to high winds.  In
Australia, little has changed from recent weeks.  Production trends are on the
downside.  Monthly production, when compared to last year, was running ahead
of last season for the first 3 months of the season (July - September), but
declined in October by 1.4%.  Although October production was lower,
cumulative production for the first 4 months (July - October) totaled 3,687.9
million litters, 2.8% ahead of last season.  Most milk producers and handlers
indicate that declines will most likely be reported for the balance of the
year when compared to the previous year.  Earlier projection were that 2006 -
07 annual production would trail last season by 7 - 8%, but recent revisions
now peg the decline to be closer to 10% lower.  Most milk producers and
handlers attribute the decline in milk volumes to the lack of moisture and
poor pasture and crop conditions.  Drought conditions throughout most of
Australia's agriculture community are causing crop yields to be much lower
this year.  Reduced irrigation water supplies are being reported by many
within the dairy industry and additional volumes are expensive and demand is
strong for this water from other agricultural products.  Most farmers are
making due with pastures that are poorer than usual.  Supplemental feed stocks
are lower and expensive also.  Now that milk production is on the down side,
most manufacturers and handlers are very cautious about over commitment to
customers at this time.  In many cases, they have closed the books on orders
and will take a wait and see attitude as the season winds down.  Manufacturers
and handlers are directing declining milk volumes toward products of best
return with cheese production probably getting the tilt at this time.  The
calendar indicates that the production year is half over already and producers
and handlers remain hopeful, but not overly optimistic, about the balance of
the season.

0930c steve Schneeberger  (608)250-3204

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STAT News Service