Oceania Dairy Market Overview

MADISON - Oct 9/08 - SNS -- The USDA published its latest review of dairy market conditions in Australia and New Zealand today.

OCEANIA OVERVIEW:  The new milk production season is well underway in
New Zealand with milk volumes estimated to be at 2/3 of peak level.
Milk handlers indicate that output trends are basically on track with
projections.  Usually, milk will peak out in New Zealand around the
end of the October.  At this point, milk volumes are slightly heavier
than last year at this time.  In Australia, lack of moisture continues
to be a major concern for dairy producers, although milk output in
August ran 1.2% ahead of last year with cumulative volumes 3.6%
heavier than the first two months (July and August) of last year.  In
Victoria, the major milk producing region of Australia, water
allocations in Northern parts of the region will be lower this season
as insufficient volumes of winter moisture occurred to replenish
greatly depleted reserves.  This region is dependent on irrigation
water to maintain pastures during the growing season.  In more
Southern regions, moisture is typically more naturally available and
pastures are able to be maintained without supplemental water.  Grain
prices are easing, thus dairy producers that will be securing
supplemental feed stocks, due to limited moisture for pastures, will
be able to do so without excessive cost.  Current economic
unsettledness in the U.S. is starting to impact other international
markets including Oceania.  In recent days, the Australian and New
Zealand dollars, against the U.S. dollar, have weakened greatly.  The
unsettled economy, along with weakening international dairy product
prices, has slowed buyer interest greatly.  Oceania traders indicate
that some buyers that locked into long term fixed contracts are not
pleased at the current trend of prices.  For those that are nearing
the end of the initial contract, shorter terms are being negotiated.
For those contracts that are nearing completion, prices for future
products will be considerably lower.  Traders and handlers question
how much lower prices will trend before markets stabilize and buyers
return to the marketplace.  The recent melamine situation in China
continues to impact their dairy industry.  Additional detections of
melamine in dairy products continue to be reported, thus buyer
confidence in Chinese generated dairy products is low.  Some Oceania
traders and handlers indicated that a few weeks ago, buyer interest
from China for whole milk powder was enhanced by 20 - 30%, but now has
eased.  Some uncommitted volumes of whole milk powder were available
for this inquiry, but now are no longer available.

0930c steve Schneeberger  (608)250-3204

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STAT News Service