August 6, 2008

New Zealand predicts world dairy prices to decline

World dairy prices are likely to drop in 2009 from record peaks as demand falls and production increases, said New Zealand's ministry of agriculture on Tuesday (August 5).

"During 2008 and 2009, weaker world economic growth is likely to mean lower demand for dairy products," the ministry explained in its annual situation and outlook report.

"International dairy prices are expected to continue falling back from the peaks achieved in early 2008, as supply expands," the report indicates.

However, demand for dairy is expected to remain strong to keep global prices from plummeting to pre-2006 levels, the ministry said.

Furthermore, the ministry sees increased production in New Zealand and Australia, as the effects of drought recede, as well as in the US and EU.

In New Zealand, milk production and manufactured exports are forecast to steadily increase, and a recovery in Australian milk production is likely, the ministry stated.

New Zealand is home to the Fonterra Cooperative Group, the world's largest dairy exporter. The marketing cooperative for New Zealand's dairy farmers exports 95 percent of its production and accounts for 7 percent of the New Zealand economy's annual gross domestic production.

New Zealand has averaged 2.2 percent of world milk production from 2005 to 2007, making it the world's eighth-largest milk producer.