March 22, 2011

Global dairy prices seen to climb in Q2

Global dairy-market fundamentals will beat other price cues and recent market weakness to boost prices in the next months, agricultural lender Rabobank said Monday (Mar 21).

The global dairy industry will enter the second quarter of the year "with a veritable cacophony of market noise ringing in our ears," such as geopolitical instability, natural disasters and a nuclear crisis, the bank said in a quarterly industry report.

"Fundamentals point to continued market tightness," with consumption improving as rising incomes and employment outweigh increasing retail prices, as well as ongoing shortages in key import regions and expectations of another rise in global grain prices, it said.

New Zealand-based Fonterra Co-Operative Group Ltd., which sells 40% of the world's traded dairy produce, said Wednesday that average whole-milk powder prices fell 11.4% in its internet-based auction, the first significant fall since October.

Australia accounts for about 10% of global dairy product trade while European countries, the US, Argentina and Brazil also are global suppliers.

International dairy commodity prices rose sharply through most of the first quarter before a sudden contraction wiped off around half of the gains in mid-March, when markets became jittery before events in Japan sparked a financial market slump and a selloff in agricultural commodities, Rabobank said.