Prices have plunged almost 40 percent from a record in February 2014, as farmers have ramped up production and Chinese demand has slowed, according to a United Nations measure of dairy products. Global production of milk, cheese and butter will rise to records this year, according to the U.S. Department of Agriculture.
European farmers are increasing output after production limits ended in April, while supply from New Zealand, the biggest exporter of milk powder, has been better-than-expected during a drought, according to INTL FCStone, a commodities brokerage.
Average prices on New Zealand’s GlobalDairyTrade auction, the global benchmark, fell to $2,412 a metric ton on Tuesday, the lowest since August 2009.
China might reduce purchases of whole-milk powder this year, while imports of non-fat milk powder will grow at a slower rate than previous years, according to the USDA. China uses milk powder in infant formula.
The EU is exporting less whole-milk powder and cheese after Russia banned food imports from the region in retaliation for sanctions related to its policies in Ukraine. Milk was 20 percent cheaper in April than a year ago, according to data released recently by the Dutch Federation of Agriculture and Horticulture.
Lower prices might pinch farmer profits, leading to less production later this year, said John Lancaster, a dairy analyst at FCStone in Ireland. Although farmers have benefited from lower feed costs, too much or too little rain would hurt pasture growth and result in less milk production.
Source: Dispatch
