Dollar and droughts affecting dairy trade

WORLDWIDE – The depreciation of the US dollar relative to the currencies of most other dairy product traders and drought in Australia are the major factors affecting the international dairy trade since December 2002.

That is the verdict of the United States Department of Agriculture’s Foreign Agricultural Service, which recently released its report, titled ‘Dairy: World Markets and Trade.’

During the last two years, the currencies of three major competitors of the USA have appreciated significantly relative to the dollar. Compared to June 2001, the euro is up over 35%, while the New Zealand dollar was up more than 40% and the Australian dollar is 28% higher.

These changes impact the competitiveness of exports from these countries relative to those from the USA. European support prices and frequent changes in subsidy rates help protect European producers, while those in New Zealand and Australia must bear much of the cost themselves.

The report said that while evidence from actual and estimated exports suggested trade volume remained relatively high, international prices showed that import demand continued to be weak.