Commodities surge, tough times for dairy

Dairy farmers are hopeful of a better year in 2017, after some shock price cuts to the farmgate milk price by Australia's two biggest milk processors caused a crisis in the dairy sector in 2016. By Mike Osborne
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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 significant growth in supply, Russian sanctions on dairy imports, slowing demand in China and highly competitive markets.
The cuts to the farmgate milk price hurt dairy farmers deeply, loading many with debt, forcing some out of business, and left 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 that work began with ex-brewing boss Ari Mervis appointed as CEO in December.
Things may be getting better for dairy farmers. Agribusiness specialist Rabobank says good conditions and a recovery in prices for dairy commodities have boosted sentiment.
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

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.

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