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Sunday 4 December 2016

Could world dairy prices bounce back further today?

Declan O'Brien

Published 15/11/2016 | 09:30

Getty Images/iStockphoto
Getty Images/iStockphoto

Futures markets are pointing towards another bumper Global Dairy Trade auction today.

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Latest trading suggests Whole Milk Powder prices could increase by another 5-7% with limited supply the main factor in global price surge.

Dairy-product prices are likely to stabilise at current levels rather than continue to harden, Kevin Bellamy of Rabobank has forecast.

While the global dairy sector strategist said production was unlikely to grow substantially through 2017, he pointed out that demand on world markets remained weak.

He said the recent price surge on the GDT and other trading platforms was underpinned by restricted supplies rather than improved demand.

The last GDT auction saw prices up overall by 11.4pc, with whole milk powder (WMP) up 19.8pc to $3,317/t, butter up 4pc to $4,146/t, cheddar up 1pc to $3,332/t, and skim milk powder (SMP) up 6.5pc to $2,329/t.

However, Mr Bellamy said global demand remained suppressed due to the high value of the dollar and low oil prices.

He maintained that a sustained growth in dairy commodity prices would require greater activity from both Chinese and Middle Eastern buyers, and there was no evidence of this happening.

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On a more positive note for Irish farmers, he predicted that global supplies would remain tight into 2017 and Ireland would be well placed to capitalise on this.

He said the reaction of French and German farmers to expansion opportunities had been "timid", while further Dutch production growth would be curtailed by "environmental considerations".

Mr Bellamy maintained that US and New Zealand supply growth would also be limited.

"The US will find it difficult to increase exports because of the strong dollar," he explained.

Meanwhile, Mr Bellamy said a difficult winter and spring meant New Zealand farmers "will struggle to produce more than they did last year."

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