UN remains confident of stable dairy prices for 2005

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Related tags: Cent, Milk

The United Nations' food agency has singled out burgeoning demand
in Asia as contributing to the overall international price increase
of dairy products, but remains confident that prices will begin to
stabilise in 2005, Tom Armitage reports.

Using data from the US Department of Agriculture (USDA) and Farmnet, a New Zealand-based agricultural organisation, the UN's Food and Agricultural Organisation (FAO) claims that international dairy prices - referring to skimmed and whole milk powder, butter and cheese - are set to remain buoyant for the short-term, strengthened by limited export supplies and reduced export subsidies.

But although the FAO mentions that international dairy product prices rose by an average 26 per cent throughout 2003-4, with average export prices for cheese and milk powder (combining skimmed and whole milk volumes) increasing by 33 and 18.5 per cent respectively, it suggests that prices will soon begin to stabilise, taking effect in 2005.

According to the Rome-based body, global milk output during 2004 increased from the previous year's 1.1 per cent growth rate to 1.9 per cent, largely as a result of increased production across the developing markets of Asia and Latin America.

Milk output in China, for example, has shown a 20 per cent growth rate in 2003-4, following consecutive 25 per cent increases in the previous two years. The FAO claims that this increase comes in response to growing consumer demand for dairy products, improved marketing and more profitable domestic prices for dairy producers.

In Latin America, Argentina has shown the most significant change in terms of milk production with an increase of 20 per cent, while Brazil, Chile, Peru, and Uruguay all showed more modest rates of growth.

Conversely, the US - the world's third biggest milk producer - showed relatively little change over the previous year, and the EU-15 and the Russian Federation both showed declining growth rates of 1 and 4.2 per cent respectively. Australia's milk production also declined by 2.5 per cent, although neighbouring New Zealand recorded a 4.6 per cent increase on the previous year's total.

EU dairy exports have successfully increased throughout 2004, despite restrictive governmental regulations fixing their quotas and increased competition from the 10 EU accession countries, particularly Poland and Slovakia, which together have reached record export levels.

Across the EU, exports of butter and whole milk powder increased by 7 and 9 per cent respectively, while cheese recorded a slightly lower growth rate of 4 per cent.

Related topics: Markets, Pricing Pressures

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