Currency markets key to milk prices

DAIRY farmers hoping for milk prices to upturn have been advised to keep an eye on the currency markets. Sources at the Dutch Dairy Board warned that the fast-declining US dollar makes EU dairy exports less competitive.

With the US reactivating its dairy export incentive programme to subsidise exports, there could be new downward pressure on prices.

Dairy markets are described as “stabilised”, but with little room for upward potential, as intervention rules the EU market. Some 170,000 tons of butter and 185,000 tons of skimmed milk powder have been removed from the market.

To reassure the market, the European Commission has plans to extend intervention beyond August, but is waiting for signals of market improvement, before confirming extended intervention.

Positive market factors, according to the Dutch Dairy Board, are EU milk deliveries falling from their peak levels (1.5% lower from January to March, compared to 2008), and production winding down in Oceania and South America, leaving the EU the only major source of supply for the coming months. Remaining negative factors were growing dairy supplies everywhere, falling exports, and buyers still hesitating on the world market.