Softer Global Market Conditions Prevail

US - Near-term market conditions are challenging. Spurred by near-perfect weather and strong farmgate prices, milk production from the five major exporters (the European Union, United States, New Zealand, Australia and Argentina) is up more than three per cent in the current production season (beginning June 2011), says the US Dairy Export Council.
calendar icon 14 May 2012
clock icon 2 minute read

“International demand has proved insufficient to soak up all the increased surplus generated in export regions,” added Rabobank analyst Tim Hunt. “More milk is being channeled into storable commodities as a result, and there are some early signs of stock accumulation as the spring flush builds in the EU and United States.”

On the plus side, however, import demand has held up well and the import market “has shown exceptional depth,” Mr Hunt said. Last year, when the world’s largest dairy buyers Algeria, China and Russia collectively pulled back in the second half, Southeast Asia, the Middle East, North Africa and others more than made up for their absence.

Mr Hunt expects market conditions to improve in late 2012 or early 2013 as the supply balance improves. “Structural growth trends remain intact,” he said. The spring board meeting also provided an opportunity for USDEC members and staff to begin formulating their 2013-15 Business Plan. A number of key assumptions will go into the plan:

  • Lower GDP and food inflation will slow dairy demand, but growth remains positive and resilient.
  • Inventory will overhang the market into 2013.
  • A weaker Euro is increasing returns to EU suppliers in the export market (vs. the internal market).
  • Prices will remain under pressure, and US commodity trade will remain exposed.
  • Food and beverage companies’ interest in enhanced nutrition through dairy ingredients will increase.

USDEC’s fall Board of Directors and Membership Meeting will be held October 18-19 in Washington, D.C., where the rolling three-year Business Plan will be approved by the membership.

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