January 28, 2015

 

World dairy prices suffering from Russian sanctions: Rabobank

 

 

Performances for international dairy prices have taken a toll with the continual trade sanctions between Russia and Western nations.

 

Prices are further weakened by a combination of feeble demand and robust production in several parts of the world, said Michael Harvey, a Rabobank analyst.

 

He also emphasised the importance of Russia in the global dairy market, "Russia is the world's second largest dairy importer behind China, and 80% of that comes from the EU and that's mostly in the form of butter and cheese."

 

"In terms of what we're seeing in trade flow, we are seeing stock levels build in Europe to a certain degree."

 

As a result of the sanctions, European dairy farmers are now being compensated with amounts below production costs. Deliveries of dairy products had also been diverted to other markets including the Middle East, North Africa and Asia.

 

While Rabobank expects prices to stabilise towards the end of 2015, Harvey said that an extension of the sanctions beyond August could thwart that trend.

 

Amidst the political uncertainties, officials from the European Commission had recently met with their Russian counterparts to negotiate a potential relaxation of sanctions, especially on dairy products.