Rabobank reports drop in world dairy prices

Agricultural bank Rabobank says that international dairy prices have dropped by 3-8% across the board since the beginning of the year. It also has predicted that the second quarter of 2012 will see “further downward pressure on world prices, with expected declines in farmgate prices coming too late to slow production growth much through the Northern Hemisphere spring.” That being said, production growth is on the increase.

In the EU, supply expansion has found its way onto world markets, with exports up by 16% year-on-year through the fourth quarter of 2011, and skimmed milk powder shipments increased by 69%. Milk production growth for the EU was 2.7% in January.

Meanwhile, in the US, production improved by 3.4% and Rabobank estimates that New Zealand growth leapt up by 9%. Argentina also saw impressive gains of 13.4%. Argentina also has seen its export shipments improve by 19% in the one month. Australia claimed a 5.6% increase in production. This was largely due to unusually good weather across the regions.

New Zealand’s exports were 26.5% higher in January 2012 versus the year previously, and powder sales to China have been strong in recent months, with whole milk powder predominating.

Brazil, however, has seen a contraction in milk supply so far in 2012, down by 1%. Feed prices are high and low livestock prices have encouraged higher slaughter rates. Drought in its southern regions also affected the output.

On the demand side, “strong appetites for more dairy in the emerging markets” supplied brisk international trade, Rabobank reports. China and Mexico were key importers, along with the Middle East and South east Asia. Going forward, demand will be “very modest,” according to the analysts.