March 4, 2010

Global dairy prices to stay high

 

Milk production worldwide will remain constrained for most of the next five years, supporting price increases as South Korea and Vietnamese raise dairy consumption.

Global dairy prices will stay "relatively high" in 2010-11, and will remain firm until at least 2014-15, according to Australian farm bureau Abare in a report.

Compared with the average prices of the five years to 2006-07, world dairy product prices are projected to average around 25% higher over the period, Abare said.

The forecast predicted skim milk powder prices to average US$3,250 per tonne in 2012-13, compared with U$2,333 per tonne during the world economic slump four years before. This reflected growing demand in developing countries, as consumer wealth increases and retail chains carry more chilled produce.

Demand for dairy products is responsive to rising incomes and diets in many Asian countries are becoming more Westernised, Abare said.

Production in many major producing countries will remain constrained, with relatively high grain prices limiting growth in regions such as Europe with intensive dairy operations.

New Zealand will manage growth of 2% per year, below historic rates, and reflects the end of a period of mass switching of farms to dairy operations. The extent to which further conversions take place over the medium term is likely to be limited by the availability of land, Abare said.

Developing countries, notably Brazil, also possessed potential for raising production. But this capacity would largely go to meeting rises in domestic consumption, said the report.