Dairy price pressures to ease up end of 2010, Rabobank

By Jane Byrne

- Last updated on GMT

Related tags: Milk

As supply increases from producers in the Southern hemisphere and demand growth slows the currently high global dairy prices are expected to ease somewhat, according to market analysts.

In its quarterly report on the dairy market, Rabobank said these shifts in prices are unlikely to occur rapidly and may be more noticeable in the fourth quarter of 2010.

The bank notes a renewed momentum in the supply side that could improve product availability in the second half of the year.

They claim that this buoyancy is resulting from factors such as a hike in milk prices on the back of warmer weather in May and higher production output in export regions, the EU releasing intervention stockpiles coupled with a developing premium for powder production over cheese fuelling resurgence in US exports.

USD prices of international dairy commodities except for whey, continued the analysts, gained ground again through the ten weeks to mid-June. “Price direction in coming months is likely to be heavily influenced by the relative speed of the incoming supply tide.." ​said the researchers.

Global butterfat prices, in particular, are expected to dip further due to pressure from vegetable based alternatives, notes the bank.

In the EU, the analysts report that local dairy consumption remains weak and that wholesale buyers remain reluctant to invest after the recent price surge, with signs of a shift to cheaper substitutes to dairy in several categories.

Strong demand from countries outside the EU brought about a surge in exports from the bloc, with skimmed milk powder (SMP) exports up by 113 per cent YOY in the first quarter of 2010 along with a rise in butter and cheese volumes of 19 and 20 per cent respectively.

The combination of rises in EU milk production and destocking interventions will fuel export growth from the bloc in the third quarter given that the fact that the current low local demand levels for dairy products are unlikely to change in the period, predicts Rabobank.

Related topics: Manufacturers, Pricing Pressures

Related news

Show more

Follow us


View more