Dairy worries despite positive sentiment
Published 24/05/2011 | 05:00
It is a sign of the times that each ripple in world dairy markets spurs fears that we might again be on the cusp of a 2009-style price collapse.
Dairy farmers are nervous. They are now operating in a global market and are at the mercy of the peaks and troughs that unfortunately characterise commodity trading.
There has been talk from some of the potential for buyer "burn-off" if prices continued to increase.
Last week brought news of a 5.8pc drop in US butter prices and a 1.5pc fall in skim milk powder (SMP).
However, there was also good news from a couple of quarters. Peter Duggan, of Bord Bia's Strategic Information Service, points out that despite the slight easing of dairy prices, most products are performing at levels 20-30pc higher when compared with last year.
Dutch SMP is 20pc higher to date at €2,312/t, while the equivalent New Zealand product is 25pc stronger.
While output has certainly increased this year -- New Zealand production is up 4pc, while it is up 16pc in Argentina -- demand has also kept pace.
The global economic recovery is expected to help dairy demand in key emerging markets over the next few years.