News
04.03.2010
Output hurdles to help dairy prices stay high
Milk production will remain constrained for most of the next five years, feeding a rise in prices as pizza-crazy South Koreans and butter-hungry Vietnamese raise dairy consumption, official Australian forecasters believe.
Global dairy prices will stay "relatively high" in 2010-11, John Hogan, of Australian farm bureau Abare said at a conference in Canberra held to accompany the release of a farm market outlook report.
And they will remain firm until at least 2014-15, the briefing added.
"Compared with the average prices of the five years to 2006-07, world dairy product prices are projected to average around 25% higher over the period," Abare said.
The report came as Fonterra, the New Zealand dairy giant reported a return to rising prices at its monthly internet dairy auctions.
East meets West
The forecast, predicting skim milk powder prices will average $3,250 a tonne in 2012-13 compared with $2,333 a tonne during the world economic slump four years before, reflected growing demand in developing countries, as consumer wealth increases and retail chains gear up to carry chilled produce.
"Demand for dairy products is responsive to rising incomes and many Asian countries have been experiencing Westernisation of their diets," Abare said.
"Cheese consumption in the Republic of Korea is expected to grow strongly over the medium term in response to greater exposure to Western foods, such as pizza and pastas, and the associated rise in fast food outlets."
Land factor
Meanwhile output will remain constrained in many major producing countries, with relatively high grain prices constraining growth in regions, such as Europe, with intensive dairy operations.
While New Zealand, the world's biggest dairy exporter, will manage growth of 2% a year, that is below historic rates, and reflects the end of a period of mass switching of farms to dairy operations.
"The extent to which further conversions take place over the medium term is likely to be limited by the availability of land," Abare said.
While developing countries, notably Brazil, also possessed potential for raising production, this capacity would largely go to meeting rises in domestic consumption.
Agrimoney
