MD_DA120
DA
MD DA120 OCEANIA DAIRY MARKET OVERVIEW
MADISON, WI.  OCTOBER 9, 2008 (REPORT 41)                             
                                                          

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