Dairy giant says China deal a huge win

Australia's largest dairy company Devondale Murray Goulburn says global markets remain volatile, but a free trade agreement with China bodes well for the future.

Chairman Philip Tracy says Russia's ban on dairy imports from Australia, the European Union and US has impacted global trade.

Traditional exporters have also lifted supply as they chase the record prices for key ingredients reached last financial year, he said.

But international demand for Australian dairy foods generally remains strong, and the outlook for long term demand, particularly from Asia, is very positive, he said.

"Given these factors, we do expect international dairy commodity prices to recover, but it is difficult to predict the timing and strength of the recovery," Mr Tracy told the dairy co-operative's annual general meeting.

"On a very positive note, the free trade agreement with China is a huge win for Murray Goulburn and for the dairy industry broadly."

Once the free trade deal was formally enacted, Australia's competitive position relative to New Zealand would improve, giving it an advantage in some products, he said.

"It is now up to Murray Goulburn to further develop our products and supply chain into China to capture value from the opportunity the free trade agreement provides," Mr Tracy said.

Shareholders were also told Murray Goulburn was still consulting dairy farmers on changes to the company's capital structure.

It is considering a change that maintains 100 per cent farmer control, but allows investment in Murray Goulburn through a separate, non-voting unit trust.

A new structure would help the company raise funds needed to rejuvenate its manufacturing facilities and supply chain.

Murray Goulburn believes it will need to invest up to $500 million in technology and automation over the next three to five years to supply customised dairy foods to Asian customers.

Mr Tracy said a fourth round of supplier meetings is planned for early 2015, to be followed by an extraordinary general meeting and subject to this, a potential capital raising in mid-2015.

Murray Goulburn's milk supply is now 3.4 billion litres - 37 per cent of Australia's milk pool.