Rabobank predicts slow ease in global dairy prices

Posted by Josette Dunn on 25th June 2010

High dairy commodity prices are likely to ease, but not rapidly, according to the latest report by Rabobank.

Milk splash

The global dairy report for the second quarter published yesterday (24 June), found that while global dairy prices are expected to ease from current highs – as world supply builds and demand growth begins to slow – the drop is unlikely to be rapid or to occur until later in the year.

“Demand for dairy is expected to continue through the second half of 2010, building on recovery that has come sooner and stronger than anticipated. However, the rate of growth may well slow in the face of headwinds from reduced economic growth, rising retail prices and substitution pressure,” the report noted.

The report revealed however, that Australia’s dairy industry looks “well positioned”, with all signs pointing to “continuing exceptional conditions” for dairy farmers for the start of the 2010/11 season.

“Milk prices are expected to be high, the margin over feed costs even higher and the irrigation-water availability the best in years. While growth will be tempered by caution in the wake of the recent boom/bust cycle, Rabobank expects milk supply to show solid growth through the third quarter. Processing and the strength of third quarter 2009 shipments mean year on year export growth will come later,” the report added.

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