Global dairy prices leapt up in January rising more than any other group of food commodities in the monthly Food Price Index, published by the UN food agency.
The new data revealed that dairy prices in January were up 6.2 per cent from December while the average month-on-month increase across a basket of food commodities was 3.4 per cent. The monthly increase takes dairy prices up just 17 per cent short of the record peak of November 2007.
Dairy price explanation
According to data compiled by the Food and Agriculture Organisation (FAO), January 2011 prices for butter soared to $4925 per tonne, up from $4500 in December 2010. Prices for skim milk powder were at $3500 up from $3075. For whole milk powder prices for January increased to $3801 from $3550 per tonne.
The FAO said the sudden surge in dairy prices was caused by the normal seasonal reduction in southern hemisphere production, in the context of continued firm demand for dairy products.
Merritt Cluss, an FAO analyst, told DairyReporter.com that the impact of the seasonal decline was accentuated by the heavy rains and floods in Australia that put a big squeeze on production.
Cluss added that the seasons are having a bigger and bigger effect on global dairy prices as Oceanic countries fill the gap left by falling EU production. This is because dairy farms in New Zealand and Australia rely less on feed and so production levels are more closely linked to pasture quality, and therefore the seasons.
But the January dairy price increase is not just a question of supply. Demand remains strong, particularly from China, where imports have increased significantly in the last two years following the Melamine scandal and subsequent decline in local production.
Food commodity hike
The price hike also comes in the context of a broader trend for higher prices across all food commodities.
Cluss said the general trend is the consequence of several interlinking factors. Demand is increasing and supply is struggling to respond because of increased energy and other production costs.
The Food Price Index is now at its highest level (both in real and nominal terms) since FAO started measuring food prices in 1990.
In a statement, FAO economist Abdolreza Abbassian said: “The new figures clearly show that the upward pressure on world food prices is not abating. These high prices are likely to persist in the months to come.”