ASB Bank Report

Today's ASB Bank (New Zealand) report is interesting:

The big news this week is the increase in Fonterra’s 2010
season forecasted dairy payout to $6.05 per kilogram of milk
solids. This payout is made up by a $5.70 Milk Price and a
$0.35 Value added component. The increase beat ASB
expectations of payout to increase to around the $5.50 mark.
The increase reflects the strong commodity prices that have
been coming through over the past 5 months. Since July, all
Oceania dairy commodities tracked by NZX Agrifax have
increased by at least 48%, with butter up close to 110%.
On the production side, NZX Agrifax reported last month that
NZ production is running slightly above the previous year
(+1%). However, production from other regions of the world is
currently down. Australian production is down circa 1.6% for
the season to date. Meanwhile US (-1%) and EU (-0.4%)
production is also down. The fact that global production is
running below previous levels may provide some indication of
the tightness in commodity markets at present. There is
evidence (backed up by longer dated contracts on gDt) that
dairy buyers are prepared to pay more for product to ensure
supply down the track. This is also compounded at this time
of year when EU and US production is in their seasonal 'lulls'.