Q4 2020 Milltrust Australian Citrus and Dairy Commentary

The Australian citrus season has ended, with all indicators depicting a strong season despite Covid-19 disruptions and China trade tensions. Our farm lessee reports that volume sold and prices obtained are comparable to the previous year. The table grape season commences in late January and the focus is on providing early grapes into the export markets of Japan; Thailand; Singapore; and Indonesia, where premiums are paid due to scarcity of supply.

Whilst the persisting La Nina weather system has ensured that irrigators will receive all their water entitlement, the price of water (both permanent entitlement and temporary allocation) firmed during Q4 as irrigation was increased due to the southern hemisphere summer. In Dec-20, temporary allocation water was trading for AUD c.200 ML and permanent entitlement at AUD c.6,000 ML. Demand for quality horticultural assets remained strong.

This spring, plentiful pasture growth, wet weather and warm days have resulted in a significant surge in feed production, taking the edge off hay and grain prices. Milk production conditions are generally favourable across the country and have improved over spring. Whilst milk volumes for the season to date are above prior season levels, growth has slowed down in recent months as a smaller national herd, a drop in farm numbers and labour challenges create tangible limitations. At the same time, the easing of Covid-19 restrictions has unleashed months of pent-up consumer demand and seen foodservice sales rebound.

Globally, dairy commodity prices have appeared almost immune to the volatility brought on by Covid-19 and the contracting world economy so far this year. Relatively balanced supply and demand fundamentals have kept dairy commodity prices supported. The favourable seasonal conditions and increased water availability have buoyed interest in quality dairy assets across all production regions and is demonstrated by recent strong sales.