McMahon News Room

 

IMPORTANT ANNOUNCEMENT   There are some important developments about which I wish to inform my valued customers and suppliers.   As many of you are aware, JM McMahon & Co Pty Ltd (“JMM”) has had a Joint Venture marketing and logistics agreement with New Zealand Dairies Ltd (“NZDL”) since 2006, which is the year NZDL was formed as a company. This arrangement is managed by the JV company Dairy Exports New Zealand Ltd (“DENZL”).   Very recently, I sold my shares in DENZL to NZDL in return for benefits which include continuing rights to market the DENZL brand of milk powder internationally and an annual allocation of NZDL’s whole milk powder production.   This share sale follows the successful sale of my shares in the production company NZDL to Nutritek, a Russian-based producer of infant milk powders, and their establishment of a majority shareholding in NZDL.   The NZDL and DENZL share sales provide various opportunities for me, which brings me to another development. Between late June’09 and late January’10, my wife and I plan to give our children a broad overview of the world by taking them out of school for a half year and giving them a different kind of education. We plan to spend up to 7 months travelling in different regions of the world. As our children are 12 and 14 years old, we feel this is an ideal time for such a trip, and presents a once-in-a-lifetime opportunity for our family to do this together.   As your business is very important to me, and to ensure the ongoing management of our relationship, an arrangement has been formed with Australian Dairy Goods Pty Ltd (“ADG”) to conduct JMM’s business through ADG’s commercial departments. This arrangement includes logistics, documentation and administration functions and will commence for shipments May 18 onwards.   ADG is a successful dairy exporter established in 1999, based in Melbourne, and run by Andrew Paterson. ADG has developed a global network which includes end users and distributors in Latin America, the Middle East and Europe.    During my travel period I will be in semi-regular contact with the ADG office; however, Andrew and his experienced team will be on hand to answer all enquiries. I will be back in Australia by the end of January’10 when I will resume the day to day management of your account.   With these developments, it is no longer necessary for me to maintain the office in Gordon, Australia. This office will close on May 15. Thus, the arrangement with ADG enhances efficiency, while also allowing this family opportunity to proceed.   Every effort has been made to ensure the smooth transition of existing and future shipments. I will soon be in contact with those of you who have shipments in the system now to discuss these in further detail.   I will also be in touch soon with those of you who do not have shipments in the system with us at present, in order to provide contact details for future business.   I can assure you that service will not diminish under the arrangement with ADG; on the contrary, we believe that business opportunities will be enhanced.   I would like to take this opportunity to thank you for your great support to date. I look forward to further building our business together in the years to come.   Should you have any questions, please let me know.    JM McMahon & Co Pty Ltd     John McMahon Managing Director

NEWSLETTERS

09/04/2009

Australian Milk Production July-Feb’09 –  Official milk production statistics announced today show that milk production for the month of February was 3.7% down on Feb’08. Overall, the season to end February is 2.4% up on the previous season. The poor February result reflects the record heat wave experienced during February, particularly in Victoria and South Australia. The key production state of Victoria was down 7.3% for the month. The northern Victoria irrigation area was down a significant 15.0%, reflecting difficulties in producing milk in this area in particular.

Expectations for the full season Jul’08-Jun’09 are that Australian milk production will be 1-2% up on season 2007/08.

New Zealand Milk Production Jun’08-May’09 – Unofficial expectations for season 2007/08 are that milk production will be up 3-4% on the previous season. This is a major turnaround in expectations from earlier in the season.

It is expected that lower farm milk prices will significantly limit NZ milk production growth in 2009/10, as they will in Australia.

11/12/2008

Australian Milk Production July-October’08 –  Official milk production statistics announced today show that milk production for the season to end October is 1.6% up on the previous season.

Expectations for the full season Jul’08-Jun’09 are that milk production will be similar to season 2007/08.

New Zealand Milk Production Jun’08-May’09 – Important NZ dairy production areas are currently in need of significant rain now if a significant drop in production is to be avoided. Unofficial expectations for season 2007/08 are that milk production will be up only 1-4% on the previous season. This is a major turnaround in expectations.

Nevertheless, we welcome your enquiries, including for instantised/vitaminised WMP.

I would like to take this opportunity to wish you all the best for 2009, and to thank you for your great support during this past year.

13/11/2008

Australian Milk Production July-September’08  Official milk production statistics just announced show milk production for the month of September to be 1.7% down compared with September’07. This reflects very dry conditions in September. In the key state of Victoria, production for the month was down 2.2%. Particularly noticeable was September’s production in northern Victoria, which was down a massive 5.4%. This region is heavily dependant upon irrigation.

Season-to-date production (July-September) is 1.4% up on the previous season, due to a favourable July-August. However, October has been a very dry month, and we expect it to be down on the previous season.

Expectations for the full season Jul’08-Jun’09 are that milk production will be similar to season 2007/08.

New Zealand Milk Production Jun’08-May’09 – Unofficial expectations for season 2007/08 are that milk production will be up around 7% on the previous season.

We welcome your enquiries.

We are currently contracting whole milk powder sales for late November shipment onweards, including for instantised/vitaminised WMP.

14/07/2008

Australian Milk Production Jul '07-May'08 Official milk production statistics announced today show milk production to be down 4.6% on the same period in the previous season.

As we near the end of our milk production season, expectations for the full season Jul'07-Jun'08 are that milk production will be around 5% down on season 2006/07.

June was a very dry month in southern Australia, where by far the majority of the milk production is located.

New Zealand Milk Production Jun'07-May'08 Due to the effects of the very severe early '08 drought, unofficial expectations for season 2007/08 are that milk production will be around 4% down on the previous season.

In spite of the above, we continue to have some supplies of milk powder, cheese and dairy fats, and welcome your enquiries.

We are currently contracting whole milk powder sales through to December shipment. For your advance information, it is very likely that we will have significant quantities of instantised/vitaminised WMP for October shipment onwards. We expect this to be confirmed by end July.

21/08/2007

Australian Milk Production Final milk production statistics for the full season July’06-June’07 are just out, and show that farm milk production was 9,579 million litres - down 5.1% on the previous season. This largely reflects “the spring that wasn’t” in late 2006, with resultant poor pasture growth, minimal fodder conservation and a disastrous grain crop.

This is the lowest seasonal total in Australia since 1997/98, and is a function of a terrible run of dry years in southern Australia, starting with the severe drought of 2002/03. Season 2006/07 was down 15% on the record season of 2001/02.

With exports representing around 50% of Australian production, this means that export availability is around 30% down over that period. Australia represented a significant 12% of world dairy trade in 2006. So, this decreased production equates to 3-4% of world trade, and is a contributor to the “perfect storm” of factors which have led to the current situation of world record dairy pricing.

The following historical Australian milk production totals are in billions of litres, with relevant comments attached:

1979/80             5.4b lts

1989/90             6.3b lts             The 1980’s saw stagnant milk growth, due largely to the strength of  EU exports

2001/02             11.3b lts           Strong growth through the 1990’s culminated in record milk production in 2001/02

2002/03             10.3b lts           The “1 in 100 year” drought – a severe example of the “El Nino” cycle

2005/06             10.1b lts           Recovery from the 2002/03 drought was slow

2006/07             9.6b lts             The “worst drought on record” hits many parts of southern Australia.  Significant floods in NSW and Victoria in recent months fell mainly along the coast, and provided little inflow to the catchment of the highly significant Murray-Darling river system, which provides the majority of southern Australia’s irrigation water.

The cumulative effect of several dry years in a row in this region is that irrigation water storage in this catchment is extremely low. As a result, irrigation water availability will be minimal in season 2007/08, which will again badly affect farmers in this region.

On the positive side, winter rainfall in most parts of southern Australia has been close to “normal”, and there is an expectation of reasonable pasture growth in non-irrigated areas and a good season in the grain belt.On balance, it is expected that season 2007/08 will see similar milk production to season 2006/07.

Looking further forward, the positive paradigm shift in world pricing provides a very great incentive for dairy farmers to maximize their production. The coastal areas of south-eastern Australia in particular are expected to increase milk production significantly in coming years.

It will take some years for the reserves of the irrigation catchments of the Murray-Darling Basin to be restored, even with a successive run of “normal” seasons. There will be significant change in the way water is distributed in this region in the future. It remains to be seen what the long term effects will be on the dairy industry there. Without doubt, there will be some significant ongoing effects.

On balance, the Australian Dairy Industry has been significantly affected by drought since 2002/03. In some areas the effects will be long-lived. Other areas are expected recover and return to a production growth curve in the coming years, though recovery will not be quick. Future growth in the Australian dairy industry as a whole is likely to occur in small increments.

New Zealand Milk Production The official NZ season starts in June each year. The June’06-May’07 season finished 3% ahead of 2005/06, thereby hitting another all-time high. Where the limiting factor in Australian pasture growth is water, in New Zealand it is usually temperature. If NZ experiences a “poor” season, it is generally because the weather’s colder than normal.

It’s too early to tell, but a “normal” season in NZ would result in production increasing a further 2-3% in 2007/08.