May 4, 2012
The fall in dairy prices, which at a benchmark auction fell to their lowest in more than two years, is to continue, due to to a "positive supply outlook", the United Nations revealed.
The pace of increase in world milk production this year will accelerate above last year's 2.3%, as the round of favourable pasture conditions, the UN's food agency, the Food and Agriculture Organisation (FAO), said.
The organisation, flagging a "favourable conclusion to the southern hemisphere milk producing season, and an equally positive opening of the northern hemisphere season", forecast world milk output hitting 750.1 million tonnes this year, a 2.7% increase on 2011.
Among exporters, output will rise to 90.6 million tonnes in the US and increase 1% to 156.5 million tonnes in the EU, the top producer, while Argentina will drive 4.4% growth in South American output.
Such production increases will swamp a two million-tonnes rise in trade to 52.7 million tonnes, reducing exporter's pricing power.
"The positive supply outlook for the rest of 2012 is likely to mean further downward pressure on prices," the FAO said.
Indeed, already the "current market sentiment ï¬nds importers delaying placing orders in order to see if prices drop further".
The organisation also flagged the role of the weakening euro, the currency of the major producing bloc, in softening prices, which are generally traded in dollars.
The comments came as the FAO revealed its index of milk prices had tumbled by 5.8% last month to its lowest level since August 2010.
"The prevailing downward trend reflects a rebuilding of supplies especially in Oceania and South America," the agency said.
However, the decline was less steep than that recorded by the globalDairyTrade auctions, run by New Zealand-based Fonterra, the top milk exporter, which continued their slide at the latest event on Tuesday.
A globalDairyTrade index of dairy products fell 2.4% to its lowest since September 2009, and taking to 37% losses from a high in March last year.
Tuesday's decline was led by a 13.6% slump in prices of anhydrous milk fat.
Prices of skim milk powder also fell relatively steeply, by 4.6%, to their lowest since October 2009.
