Decade ahead looking good for dairy sector
And there are nine good years ahead, according to the Food and Agricultural Organisation (FAO) and Organisation for Economic Co-operation and Development (OECD).
In the international organisations’ joint agricultural outlook report, they predict that whole milk powder prices will continue to rise steadily, peaking at $263/100kg in 2008, from $229 in 2006.
After 2008, they expect prices to decrease to an average for whole milk powder between 2009 and 2016 of $251.
Skim milk powder is also expected to follow this pattern, with prices expected to peak in 2008 at $269/100kg, from an estimated $235 in 2006. Following a gradual price decline in 2009, the average price for the product up to, and including 2016, will be about $235, according to the FAO and OECD.
They say the global price for butter will rise continually towards 2016 to $223/100kg, from $186 in 2006.
Demand for cheese is also expected to outgrow production levels this year, resulting in prices peaking this year at a predicted $311/100kg (from $273 in 2006). The average price expected between 2009 and 2016 will be $303.
From the farming point of view, world price prospects are not so good for meat products.
And the FAO and OECD also predict higher animal feed costs, as growing use of cereals, sugar, oilseed and vegetable oils to produce fossil fuel substitutes underpins crop prices.
Soybean prices have already risen by 37% since September 2006, according to the Chicago Board of Trade futures and options exchange. Maize prices rose 18% from September 2006 to March 2007, but have since dropped to a mid-way point. Wheat prices have steadily increased 50% over the past 12 months.
This trend is expected to add to the upward pressure on livestock product prices over the coming decade, with population growth and rising demand for commodities from India and China also impacting on prices.
The FAO and OECD predict that the impact will be felt most keenly by net food importing countries, and the urban poor.
But farmers who need feed for their livestock could also face rising costs and lower incomes. Subsidies are unlikely to bridge the gap if, as the FAO predicts, the belief that high prices are here to stay may also entice more governments to reform their agricultural policies by cutting farm subsidies and welcoming more imports — thus removing key sticking points in the stalled WTO trade talks.
Developed countries are likely to lose export market share over the next decade, as developing countries prosper from more liberalised global trade.
Already, food export growth from Brazil and Argentina has been “staggering,” according to the FAO/OECD report. But OECD countries are expected to continue to dominate exports for wheat, coarse grains and dairy products.
The OECD’s Loek Boonekamp said skyrocketing prices will be a double-edged sword. “I think the people who grow the feedstock for the growing biofuel industry will be happy campers, I mean, the grain and the oilseed producers,” he said.
“But I think that the people who need the feedstock to raise their animals — the livestock farmers, the cattle producers, the pig and poultry producers — they will be faced with higher costs.”
