The U.S. Dairy Export Council (USDEC) says there are five keys to world dairy markets recovering in 2010 in its January Export Profile newsletter released today:
• The economy. The world economy (gross domestic product) shrunk nearly 2% in 2009. Projections for 2010 are much brighter, with some estimates saying GDP will grow 3.4%.
• Dairy prices in overdrive. World prices for dairy products shot up anywhere from 65% to 95% from July through early December. If prices continue to sky rocket, they will choke off demand. Moderation is key.
• Weather. The El Nino weather pattern could impact milk production in Australia and New Zealand. Already, Australian production is down due to dry conditions.
• Skim milk powder futures contract. It is expected that new futures contracts for SMP will be launched early this year. How buyers and sellers use this new market to mitigate risk will determine how far out on a limb they'll be willing to go to actually buy and sell product.
• China. How many dairy products China decides to import this year will be a key driver in world demand.