International Dairy Prices to Fall Further

GLOBAL - The opening months of 2012 saw international dairy prices fall between three per cent to eight per cent across the complex, extending the run of gradual price softening to a year, according to Rabobank Dairy Quarterly.

20 March 2012

1 minute read

Unusually good weather across most regions exacerbated the impact of high farmgate milk prices, driving supply growth too fast for battered western consumers to soak up, even with support from solid international demand.

Q2 is likely to see further downward pressure on world prices. Expected declines in farmgate prices will come too late to slow production growth much through the Northern Hemisphere spring. And demand will remain compromised by weak underlying economic conditions and only modest price relief for consumers.

Fundamentals should begin to rebalance as we progress through the second half, though there is a risk of only weak price support at that stage given the prospect of significant stock accumulation in coming months if we have a strong Northern Hemisphere supply peak.

In New Zealand, buoyed by exceptional growth conditions, farm expansions and high milk prices – milk production has continued to outstrip prior year levels by a long way. Rabobank expects milk supply to be up four per cent for the first half of 2012.