Sunday, December 09, 2018
 Dairy Prices at Risk of Roller-Coaster Ride  

Dairy prices could be set for another roller-coaster ride, with the worsened economic outlook posing a “substantial risk” to the market, but longer-term prospects remaining sound.

“Mounting risks of another global recession imply dairy consumption may soon waver,” Commonwealth Bank of Australia analyst Luke Mathews said, noting falls in demand during the last economic crisis.

Between 2007 and 2009, world consumption of fluid milk fell 2.8%, of whole milk powder by 2.8% and of cheese by nearly 2%.

The decline reversed a spike in prices, with values halving from early-2008 highs before recovering most lost ground. Indeed, prices doubled, halved, then near-doubled again within four years.

And the current deteriorated economic outlook “presents a substantial risk to dairy prices”, Mr. Mathews said.

Imports Dip
The comments came amid renewed weakness in grain markets on Wednesday, as hopes for a solution to the eurozone debt crisis waned on talk of discord between member countries.

And they followed signs of some weakness in orders by key dairy importers, with Russian purchases of New Zealand butter continuing to fall in July, taking the decline for the first seven months of 2011 to 37%.

China’s imports of whole milk powder last month were, at 12,377 tons, down 42% year on year, according to Global Trade Information Services.

‘Demand Outlook Particularly Strong’
However, the short-term “headwinds” to consumption for dairy products “won’t spoil the long-term story” of rising demand, Mr. Mathews said.

“Despite the near-term uncertainty regarding global dairy consumption, we consider the medium/longer term demand outlook particularly strong, driven by emerging market demand, most notably in China,” he said.

“Structural adjustment” in Chinese diets to include more dairy products “will underwrite global dairy demand over the longer term”.

Separately, Agrifax also stuck by hopes for the Chinese market, which the New Zealand-based consultancy said “will remain strong” thanks to growing wealth and urbanization, often a factor, through better retail networks, in increased dairy consumption.

“A gap has opened up between the volume of milk required to meet consumer demand and the quantity the domestic dairy industry can deliver,” Agrifax analyst Susan Kilsby said.

Source: Dairy Farmers


Posted on Wednesday, September 28, 2011 (Archive on Wednesday, October 05, 2011)
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