September 28, 2012

Global milk prices may rise in the next 12 months

In the next 12 months, global milk prices are anticipated to rise as suppliers cut production due to low prices, high feed costs and poor weather, particularly in developing milk markets.

Rabobank senior dairy analyst Michael Harvey said exports from major producers including Australia, Argentina, Brazil and the EU would not meet demand.

"We fear that much of the market has been lulled into a false sense of security by the phenomenal growth seasons we saw late in 2011 and early 2012, and the next 12 months may provide a rude awakening," Harvey said.

He said in the next nine months milk exports would fall for the first time in four years.

"With little excess inventory in the market, the equation then becomes simple -- any increase in import demand from deficit regions will create supply shortages, with the shortage fuelling an appetite for imports," he said.

Rabobank expected world prices to rise substantially, which would quell demand and balance the market. But Harvey cautioned that Australian suppliers now faced low prices.

He said southern exporting producers would receive about 10% less a kilogramme for milk solid compared with last year.

"The cost of grain-based feed has also risen by at least 20% for all in the last few months, pushing most farmers back towards the break-even mark," he said.