November 13, 2008

World dairy sector prospects seen as bright


Prospects for the global dairy sector next year are seen to recover well from this year's falling dairy prices, according to a new Rabobank report.

The report expects dairy prices to inflate if global economy conditions improve.


Economic growth and cultural change have significantly increased milk's market price, according to the report.


The growing economies of China and Asia, which had less exposure to the financial crisis, are also expected to have strong dairy demand. Consumption outside China and India could increase by 6-8 billion litres per year, of which 2-3 billion litres were required in import-dependent markets, the report said.


However, the report said it is unclear when the economy would recover and prospects for the rest of 2008 and early 2009 were bearish. Dairy demand growth was likely to remain below average due to a stagnant global economy and prices could continue to fall in the short-term.


Rising production costs, especially feed and fertiliser, are also eroding higher farm gate milk prices, the report said. Restricted production in low-cost regions indicates that the market must turn to regions with high production costs, less efficient supply chains or greater structural barriers if additional supply is wanted.


Market volatility is likely to remain, the report added.

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