Bank predicts more stable dairy market

DAIRY markets in 2010 will follow the pattern of late 2009, according to a report by Rabobank’s food and agribusiness research experts.

More stable dairy markets are suggested by their predictions of modest demand improvement, small reductions in export supplies, a gradual sell-off of EU intervention stocks to world markets and a modest softening in Chinese import volumes.

According to the Rabobank report, market recovery in recent months was helped significantly by reduced supply in the southern hemisphere, with little evidence that northern hemisphere supplies will increase until at least March or April. As a result, Dutch whey prices rose 71% to €650 per tonne, since the beginning of 2009.

Global dairy consumption is predicted to improve through 2010, based on the IMF’s forecast that the global economy will grow by almost 3%, and on shifting demographics – including a growing appetite for more westernised diets, reflected in McDonalds’ plans to open 500 stores in China in the next three years. Wider global exposure to chilled dairy products, due to rising refrigerator ownership, is also predicted.

However, in the large internal markets of the US, the EU and Brazil, any additional milk produced in the short term is expected to meet the rise in consumption levels.

Rabobank Group, among the world’s 25 largest financial institutions, focuses on the international food and agri sector and banking services in its Netherlands base.

nSources at Glanbia are “cautiously optimistic” about dairy market prospects, despite market recovery stalling in December due to buyers resisting price increases.

They attributed a much welcomed increase in commodity prices to falling milk output in the EU, New Zealand and Australia, and the EU announcement that intervention releases will be delayed until markets recover.

Some over-selling early this year into intervention, resulting in tight butter supplies, was also a factor.

Trends in underlying consumer demand and in milk output, EU intervention policy decisions and currency exchange rates would determine future market trends.


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