The Hindu Business Line : Milk powder prices seen down on improved supply

Chennai, Oct.9 Global prices for skimmed milk and whole milk powder are forecast to decline 16 per cent this year on increased supply, especially from New Zealand.

Prices for skimmed milk powder are expected to average $3,500 a tonne, while for whole milk powder it could average at $3,825, according to Abare, Australia’s independent government economic research agency.

Quarterly report

“Despite indications of slowing economic growth in some countries, world import demand for milk powders continues to grow, particularly in parts of Asia and West Asia where income growth is high and also in developed countries for use in food processing and animal feeds,” Abare said in its report for the September quarter.

In the short term, moderate growth in traded milk powder supplies is expected, reflecting proportionately more milk being used in the manufacture of high-value products such as cheese, particularly in the European Union.

Apart from New Zealand, export supplies, to a lesser extent, are expected to increase from the US too.

Drop in Cheese rates

A growth in demand for cheese is likely to be made up by excess supply. This is likely to result in cheese prices falling by 8 per cent to average $4,650 a tonne.

“Cheese production in the European Union is expected to expand in response to recent reforms that provide incentives for the manufacture of higher value dairy products. However, increasing domestic EU cheese consumption will limit growth in its exports from that region. Cheese exports from the US are expected to be higher, while exports from Australia are expected to be up slightly, in line with forecast modest increase in milk production,” the Australian agency said.

Butter prices may slip

Butter prices are forecast to decline by 9 per cent to average $3,650 a tonne.

“Butter consumption has been rising in line with rising incomes in the Russian Federation, Egypt and parts of West Asia. In the US and the European Union, butter consumption has been growing more slowly. Increased exports from the US and from New Zealand are the main driver of lower world prices,” Abare said.

On growth in milk production, it said continued growth in global demand for dairy products and relatively high prices would be met with mixed rates of growth in output in main dairy exporting regions during 2008-09 (September-August).

Constraints

“Some major exporting countries are continuing to face production constraints,” it said.

The current forecasts are lower than the projections Abare made at the beginning of the year and in June quarter. Initially, it forecast global whole milk powder prices to average around $4,380 a tonne ($4,275 in June), while skimmed milk powder was forecast to average at $4,200 a tonne ($3,650). Butter prices were projected at $3,750 a tonne ($3,750) and cheese prices at $4,950 ($4,875).

Milk output

Milk production in the European Union is forecast to increase by 1 per cent despite relatively high domestic prices for milk and a 2.5 per cent increase in milk production quotas under the Common Agricultural Policy.

“Milk prodution quotas continue to restriction production growth in some of the European Union’s larger and more efficient milk producing countries while some other member States will be unable to fill their quotas because of industry restructuring and lower productivity of some smaller farms,” the agency said. Higher feed costs and continued presence of bluetongue disease have the potential to reduce milk yields.

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