Commodities surge, tough times for dairy

Dairy farmers are hopeful of a better year in 2017, after shock price cuts to the farmgate milk price by Australia's two biggest milk processors caused a crisis in the dairy sector in 2016.
Share on twitter
Share on facebook
Share on linkedin
Share on whatsapp
Share on email

Murray Goulburn moved in April to slash the price of milk that it pays farmers and rival Fonterra Australia followed suit in early May.
The companies blamed a slump in global commodity prices and the strength of the Australian dollar.
Global dairy prices were hit by a surge in supply, Russian sanctions on dairy imports, slowing demand in China and competitive markets.
Cuts to the farmgate milk price hurt dairy farmers deeply, loading many with debt, forcing some out of business, and leaving others rethinking their future.
The cuts and an accompanying downgrade to Murray Goulburn’s profit forecasts cost Murray Goulburn managing director Gary Helou his job, while the ACCC and the Senate launched inquiries into the dairy industry.
Murray Goulburn has acknowledged it has work to do to win back the confidence of farmers and began by appointing ex-brewing boss Ari Mervis as CEO in December.
As the year drew to a close, infant formula supplier Bellamy’s surprised the market by saying its sales in China were suffering from new Chinese import regulations.
Bellamy’s shares plunged by more than $500 million in two days before entering a trading halt on December 12, which then became a suspension from trade until mid-January.
Bega Cheese and A2 Milk Company were drawn into the dairy woes.
Bega, which supplies Bellamy’s, and A2 Milk, which also makes infant formula, had to reassure shareholders that their sales were still strong.
THE RETURN OF COMMODITIES
Commodities prices have remained volatile for a second straight year, but sharp gains in recent months have brought relief from the prolonged downturn in prices.
Iron ore prices started the year near a decade-low of $US38 a tonne, mainly on the back of falling demand in China. The weak outlook took a toll on the industry – keeping most smaller miners out of the market and pushing major players like BHP Billiton to a record annual loss.
However, starting from a surprise government economic stimulus in China in March, iron ore prices more than doubled in the second half of the year as global production plateaus. Iron ore currently trades around $US80 a tonne.
Coal producers were under pressure for most of the year due to softer demand in China and a global supply glut. However, mining cuts in China forced utilities and steelmakers there to make up for the shortfall through imports, sparking a sharp run up in recent months.
During the year, thermal coal prices more than doubled to above $US100 a tonne and remain about 75 per cent up , while coking coal – used in steel making, has tripled in price.
«It is not unreasonable to expect prices of both coal and iron ore to remain higher than normal for a few more months,» Nikko Asset Management’s head of Australian equities Brad Potter says.
The recovery in oil has followed a similar trend. Crude prices hit a 13-year low below $US27 a barrel in February, but improving sentiment and the first agreement in eight years among world oil producers to cut oil production sparked a rally, with prices lifting above $US50 a barrel.
 
Source: News.AU
Link: http://www.news.com.au/finance/business/breaking-news/commodities-surge-tough-times-for-dairy/news-story/3262576a6d4eddca2d0b04ef47bb66c6
 

Mirá También

Así lo expresó Domingo Possetto, secretario de la seccional Rafaela, quien además, afirmó que a los productores «habitualmente los ignoran los gobiernos». Además, reconoció la labor de los empresarios de las firmas locales y aseguró que están «esperanzados» con la negociación entre SanCor y Adecoagro.

Te puede interesar

Notas
Relacionadas