November 19, 2010

Russian, Chinese demand save global dairy prices

According to Rabobank International's latest global dairy report, only vigorous buying by Russia and continuing strong Chinese demand are saving the global dairy market from a substantial price fall.

Russian and Chinese demand has been offsetting growth since May in global milk production, diversion of US products to the world market, and the sale of EU intervention stocks.

Rabobank sources said uncertainty remains high, but anticipated that the global dairy market will remain tight in 2011; because the current milk supply growth will be hindered, principally by higher feed costs and farmers needing to reduce debts.

On the demand side, dairy consumption is expected to strengthen due to improving labour markets in the west, strong economic growth in import regions, and strong buying by China.

In the 2012 to 2014 period, Rabobank believes China and India will need higher dairy imports than previously expected, and says the resulting demand will be hard to fill without a sustained period of high milk prices in higher production cost regions.