Rabobank Group

10-4-2008 | Other news

Speaking at the Large Herds Conference held in New Plymouth last week, Rabobank international dairy specialist, Tim Hunt said that although 2007 brought an unprecedented boom in international dairy commodity prices, strong price signals at farmgate and retail level are already working to rebalance the market.

International dairy prices more or less doubled in 12 months as a result setting new records across all product categories.

“Prices have now been passed onto consumers, who in many markets have seen the price of milk, cheese or milk powders rise 20 to 70 per cent on supermarket shelves. “Some shoppers, particularly in developing countries, are baulking at the cost: taking the speed off global demand growth,” Mr Hunt said.

Supply has also improved: New Zealand farmers aren’t the only ones being offered attractive milk prices at the farmgate. Farmers in Australia, the EU, USA, Argentina and Brazil are all now being offered prices 30 to 70 percent above previous year levels. This has encouraged production growth in these regions, and in some cases, higher export volumes.

Rabobank believes the odds are still heavily in favour of international prices holding at relatively strong levels for several years to come. The global economy is slowing, but it doesn’t look as bad as you might first suspect when we consider things from a dairy perspective - with above average growth still forecast and developing economies remaining strong.

“Volatility is also likely to be evident for several years to come. Global stocks are low, less stable countries are playing an expanding role in international trade and nervous governments in many regions are making policy on the run that is impacting many aspects of the market,” Mr Hunt commented.