Soaring international dairy prices have set new records across all product categories reported Rabobank dairy specialist Tim Hunt, speaking at the Large Herds Conference in Plymouth last week.

Hunt discussed a number of forces that he predicts will drive global prices going forward and said that strong price signals at farmgate and retail level are already working to rebalance the market.

“International dairy commodity prices exploded in 2007 as accelerating demand collided with supply shortages brought on by ongoing reductions in support to EU farmers, a surge in global feed prices and climatic disruption,” Hunt said.

“International dairy prices more or less doubled in 12 months as a result,” he continued, “setting new records across all product categories.”

In recent months export prices have slipped somewhat from the dizzy heights reached late last year and costs have now been passed onto consumers, who in many markets have seen the price of milk, cheese or milk powders rise 20-70% on supermarket shelves.

“Some shoppers, particularly in developing countries, are baulking at the cost: taking the speed off global demand growth,” Hunt said.

Supply has also improved with farmers in Australia, the EU, USA, Argentina and Brazil all now being offered prices 30-70% above previous year levels.

This has encouraged production growth in these regions, and in some cases, higher export volumes.

The key question for farmers as they consider investment decisions for the future is where the global dairy market is now headed, Mr Hunt said.

“Rabobank believes the odds are still heavily in favour of international prices holding at relatively strong levels for several years to come,” he continued. “The global economy is slowing, but it doesn’t look as bad as you might first suspect when we consider things from a dairy perspective – with above average growth still forecast and developing economies remaining strong.”

While we now appear to be past the peak of the global dairy boom, Rabobank expects that the global dairy market will offer attractive opportunities for New Zealand’s exporters and farmers for several years to come.