Dairy leaders watch trends worldwide
On the world market, commodity prices are generally expected to remain buoyant, stabilising around current levels until the end of the first quarter of 2010, as upward momentum fades away.
Price recovery up to now was supply driven; continued market recovery will depend on increasing demand on one side, and containing supply growth on the other side.
US supply growth could threaten recovery, because dairy cow liquidation has been slower than expected, and improving milk prices in 2010 are expected to reduce the rate of decline in milk cow numbers.
Nevertheless, the latest US estimate was for dairy production to fall 0.9% in 2010, following a 0.8% fall in 2009.
Declining feed prices and higher milk prices will further improve the US milk-to-feed profitability price ratio, but not to a level that will cause further expansion.
The US Department of Agriculture predicts modest demand growth in developed economies and strong growth in developing economies, resulting in a more promising outlook for the international dairy trade in 2010, provided intervention stocks are disposed of in an orderly manner.
The USDA predicts unchanged dairy production in the EU in 2010. In New Zealand, normal weather would lift 2009/’10 production above the previous season. But a reduction compared with the previous season is expected in Australia.
The global market uncertainty has been reflected in the January Fonterra auction price results — milk fat prices 4% higher and milk powder prices down 7%.
nFigures from the Dutch Dairy board have shown that 2009 milk prices paid by several big EU dairies in November exceeded 2008 prices for the first time.
However, they estimate that the average milk price paid by 16 big EU diaries in 2009 is about 23% lower than last year. Their milk price statistics for November include figures for two Irish processors, Glanbia and Kerry, respectively paying 90% and 85% of the EU average milk price in November.
