Asian companies invest €3.6bn in Russian dairy production
Asian dairy companies have been making significant investments in Russia in the last year or so.

Businesses from Vietnam and Thailand have made direct investments in the Russian dairy sector and it is helping Russia to replace the dairy imports it lost after it placed an embargo on western food imports in 2014.

TG Group, a Vietnamese dairy producer, commenced the building of milk farms in the Moscow region this week as part of its 10-year project worth over €2.4bn.

Another investment backed by the state-owned Russian Direct Investment Fund agreed to join forces with the Charoen Pokphand Group from Thailand on a joint investment for the construction of a €900m milk and dairy complex in the Ryazan region of Russia.

Russian Agriculture Minister Alexander Tkachev said: “It is not the easiest time for our country. We live in conditions of food sanctions and when the Vietnamese government supports us, it means a lot to us.”

Thai Huong, group chair of TH Group, said the first stage of the project will lead to the production of 800 tonnes of milk and products per day, and these are expected to reach the Russian market next year.

Dairy markets: milk price forecast cut again in New Zealand
Fonterra has cut its milk price forecast for the third time since August as global milk supply rises.

New Zealand dairy giant Fonterra has cut its forecast milk price for the third time this season. Announcing a trading update for the first quarter of its 2018/19 financial year, Fonterra said it had cut its forecast milk price for the 2018/19 milking season to a new range of $6 to $6.30/kg of milk solids (MS). In Irish terms, this equates to a final milk price of between 25.5c/litre and 26.8c/litre.

Fonterra’s previous forecast for milk price, which was announced in early October, was a range of between $6.25/kg MS to $6.50/kg MS (26.6c/litre to 27.6c/litre). The farmer owned dairy co-op blamed rising global milk supply for the latest cut in its farmgate milk price despite stating that demand from key dairy buying regions remained strong. Fonterra also said trade tensions in global markets was negatively impacting demand from countries that traditionally buy a lot of fat products.

“Demand from China and Asia remains strong. However, we are seeing geopolitical disruption impacting demand from countries that traditionally buy a lot of fat products from us,” said Fonterra chair John Monaghan.

Fonterra also announced its first quarter sales volumes had declined 6% compared to last year, while revenues are down 4% year on year to $3.8bn (€2.3bn).

“We are seeing challenges in our Australian Ingredients, Greater China Foodservice and Asia Foodservice businesses. I want to be clear with our farmers and unit holders about how we are tackling these issues,” said Fonterra chief executive Miles Hurrell.

“The lower gross margins and sales volumes in Greater China Foodservice and Asia Foodservice in Q1 are mainly due to the high sales volumes of butter and cream cheese at the end of Q4 2018, a slightly slower start to sales of UHT culinary cream and more sales of UHT milk which has a lower margin relative to our other products. We are expecting our sales to lift as we are seeing strong sales from our distributors off the back of demand in China for New Zealand made products, particularly our UHT culinary creams,” added Hurrell.

Camera at the mart: dairy in-calf heifers sell to €1,740 at Ballyjamesduff
Tuesday's sale at Ballyjamesduff Mart saw a special entry of in-calf dairy and suckler heifers on offer, which were met with good demand.

Tuesday’s sale at Ballyjamesduff Mart saw a special entry of in-calf dairy and suckler heifers on offer.

Mart manager John Tevlin said that demand for dairy in-calf heifers was strong. Prices ranged mainly from €1,100 to a top of €1,320/head.

There were also a share of maiden Friesian heifers on offer and these averaged around €800 each.

Along with the special entry of dairy stock, there was a good share of in-calf continental heifers calving from now.

Farmer demand was steady on previous weeks, but John said that the demand was not quite as strong as the same time last year. Prices for in-calf heifers, calving to a Limousin stock bull, ranged from €1,300 to €1,600, with €1,680 being the tops. There was also an entry of cows on offer, mainly older cows, which sold from €800 up to €1,430. Quality was the main factor determining prices.

John added that there was good demand for breeding heifers also and prices ranged from €1,300 to €1,740 for those from 430kg to 600kg.

Heifers over 500kg saw prices range mainly from €2.00/kg for average quality types to €2.25/kg for better quality types.

Today, Thursday, will see a special 50th AGM event entitled Breeding and Building for the Future take place at 8pm.

Dairy markets: GDT stops the rot as Irish butter prices slide
After seven months of consecutive decline, the GDT finally returned a positive result this week.

After seven months of consecutive decline, the GDT index finally stopped the rot this week when it returned a positive result for the first time since May.

This week’s GDT auction saw average dairy prices rise a little over 2% to an average sale price of $2,820/t.

The benchmark dairy index was led higher by a 2.5% rise in the average price of whole milk powder (WMP) to $2,670/t (€2,350/t), while skimmed milk powder (SMP) prices were marginally higher at $1,970/t (€1,735/t).

Fat prices also rebounded somewhat, with butter prices lifting almost 3% to $3,745/t (€3,300/t) and anhydrous milk fat prices rising 4% to $4,755/t (€4,190/t).

Closer to home, European dairy markets are generally quiet, with small volumes trading. Butter prices reported to the Dutch Dairy Board fell slightly in the last week to €4,160/t. Irish butter prices have fallen below the €4,000/t mark in the last week, with product trading in the region of €3,700/t and €4,100/t.

Encouragingly, powder markets are showing signs of life. WMP prices reported to the Dutch Dairy Board lifted to €2,670/t this week, while European spot prices for SMP are trading between €1,660/t and €1,700/t.

Next week, the European Commission will hold the final tender sale of 2018 for SMP from its intervention stockpiles. Market expectations are already growing that a further 25,000t to 30,000t of product will be sold, which would leave less than 140,000t still to be sold in the new year.