Dairy prices to fall globally on robust supply, weak China demand

CHICAGO: Dairy prices will slide over the next year amid increased supplies from exporting countries and weaker demand from China, according to Rabobank International. US and European producers are responding to “exceptionally strong margins” and increasing output after milk prices rose and feed costs dropped, said Tim Hunt, Rabobank’s global dairy strategist.

Slower economic growth will limit Chinese demand, especially after many consumers “significantly bought forward” supplies in the first three months of 2014, he said. World dairy prices, tracked by the United Nations, reached an all-time high in February, and rose 29% in 2013, compared to a 3.8% decline in overall food costs.

US consumers may pay as much as 3.5% more for dairy products this year, the government has forecast. “With increased export supply and China reducing purchases, the world is looking for other importers to take up the slack,” New York-based Hunt said in a telephone interview.

“With many of them experiencing currency falls against the US dollar, their purchasing power has been reduced.” Class-III milk futures, tracking a variety used to make cheese, on April 24 climbed to $24.32 per 100 pounds on the Chicago Mercantile Exchange.