MD_DA120
DA
MD DA120 OCEANIA DAIRY MARKET OVERVIEW
MADISON, WI.  FEBRUARY 5, 2009 (REPORT 05)

OCEANIA OVERVIEW:  Milk production in the Oceania region continues to 
edge lower.  In both New Zealand and Australia, milk handlers are 
concerned about how the season will end.  February 1 has arrived and 
lower payout prices across most all areas are now in effect.  Within 
the past four to six weeks, most all milk buyers have adjusted their 
payout prices by as much as 25% lower.  These adjustments are 
significant for most producers, although milk production is on the 
down side and will basically reflect a 10 - 12% annual reduction in 
price when factoring in first half positive prices when volumes were 
the heaviest.  Although lower prices this year are a major adjustment 
for most farmers, next production season will be even harder to adjust 
to.  This is a major topic of discussion at this time and could impact 
current end of season milk volumes.  Milk producers will be making 
decisions during the next few weeks as to how they will wind down the 
2008 - 2009 season and prepare for the 2009 - 2010 season.  One 
consideration is to dry off the cows earlier than usual to reduce 
costly supplemental feed cost.  Climatic conditions could also impact 
late season milk volumes.  In New Zealand, varying temperatures and 
moisture levels could impact milk output quite quickly.  In Australia, 
over most of the dairy region, record setting temperatures, reaching 
45 degree C (113 degree F) occurred for a number of days over the past 
week.  Although these record setting levels have moderated, the impact 
on the milking herd is still unknown.  Milk handlers feel that some 
production will recover, but most feel that these conditions may 
accelerate an earlier season's end.  Early season production projects 
of an 8% increase over last season in New Zealand are being replaced 
with a 4 - 5% increase and recent projections of a 1 - 2% increase in 
Australia are now reverting back to a 1% gain over last year.  
Climatic and economic conditions will be major factors in late season 
milk production trends in Oceania.  Market conditions in the Oceania 
region are little changed from recent weeks.  Oceania traders and 
handlers continue to voice their concern about the re-activation of 
export subsidies in the EU and the possibility of the DEIP program in 
the U.S. and how this will only prolong recovery for dairy producers 
and the industry.

0930c steve Schneeberger  (608)250-3204