Dairy prices shoot up from February trough

The FAO Dairy Price index of international dairy product prices has increased 82 per cent since February, and expanded 32 per cent in November alone.

Price recovery is being seen across all dairy products with butter leading the way. Prices have doubled since February.

Prices for both skim milk and whole milk powder have not been far behind increasing by over 90 percent over the same period.

FAO said the exact causes of these rapid price rises are as yet unclear, but noted several contributing factors including stock retention and low milk output in the EU.

Added to this are lower than expected output figures from Oceania, and on the demand side, FAO said the economic recovery in Asia and certain oil exporting countries could be reinvigorating trade.

With record price lows still fresh in the mind, the UN organisation warned that there is now speculation about a repeat of the large price spike that took markets by surprise three years ago.

It said future price movements depend on the response of the EU and other exporting countries holding dairy product stocks.

Dairy is not the only corner of the food market to be experiencing price increases, according to the FAO Food Price Index, which tracks a ‘food basket’ made up of cereals, oilseeds, dairy, meat and sugar.

In November, the index averaged 168 points – the highest month since September 2008. Before the 2007/8 price spike the index was below 100 points most of the time, and had never exceeded 120. However the November level was still 21 per cent below its highest point last June.