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Further uncertainty predicted for dairy markets

By Neil Merrett , 28-May-2008

Global uncertainty over the price of milk and other dairy ingredients looks set to continue to compound processor fears, according to new findings published this week by UK association DairyCo.

A late season drought in New Zealand and record levels of US exports have resulted in the cost of butter, cheese and both whole and skimmed-milk powders all reacting in different ways, suggesting no clear market trends, the findings suggest.

 

 

 

The report, based on figures from DIN Consultancy, are likely to ensure further concern in the dairy industry over the issue of raw material supply, as processors look to offset the increasing high cost pressure of acquiring ingredients for their operations.

 

 

 

Milk powders

 

 

According to the findings, the price of whole milk powder (WMP) fell by $100/tonne to $4,300/tonne in May and $200/tonne over the past twelve months.

 

 

 

With the US manufacturing only a small amount of WMP, a large gap between the cost of the product and its skimmed-milk powder (SMP) variant has been created, DairyCo stated.

 

 

 

The figures found that the price of WMP is already beginning to weaken due to generally lower EU market prices and some manufacturers switching to SMP over cost concerns.

 

 

 

Over the same twelve-month period, the cost of SMP has fallen by $1,350/tonne to $3,450 over. Nonetheless, the consultancy says that dwindling SMP stocks as the result of high US exports have put upward pressure on prices since March of this year.

 

 

Butter

 

 

Butter prices over the last twelve months were found by the findings to have risen by $1,150/tonne to $3,700/tonne.

 

 

From January until March of this year, the figures suggested that the US has exported almost as much butter as the EU for worldwide markets due to increasingly competitive pricing.

 

 

 

Although recent reforms to EU export subsidy policy have led to higher prices for the bloc's butter, the cost gap is expected to narrow soon, according to the report.

 

 

 

Cheese

 

 

In the market for cheese, prices were found to have peaked back in December 2007 before slightly falling in recent months, the findings suggest.

 

 

 

Cheddar cheese value increased by $1,500/tonne over the last year to $5,100, though has remained unchanged during the last month, DairyCo said.

 

 

 

While EU cheese exports have declined overall from the previous year, the US output of cheddar for the global market is expected to increase from a low-base, the report said.

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