Global dairy commodity prices should stabilise for the rest of this year, albeit at lower levels than last year, according to a forecast by analyst Rabobank.
As expected, improved milk production in the key exporting regions and slower import demand from China had reduced commodity prices over the past three months. But milk production was likely to slow down in the second half of the year, reducing the surplus in stocks – perhaps already indicated in Fonterra’s latest auction.
“It is not anticipated that prices will begin to respond until sufficient demand returns to the market,” said a report by DairyCo. “Lower pricing is expected to bring back some of the lower-paying buyers, but import buying from China is likely to remain modest until it works its way through excess stocks.”
However, the potential effect of an El Niño weather event on milk production, the effect of political tensions between Russia and Ukraine on trade flows and the rate of demand growth in China and emerging markets would all play a key role in price direction, it added.
Source: Farmers Weekly