Rabobank: Is Dairy’s Recovery Strength Sustainable?

January 12, 2010 07:42 AM
 


Global demand for dairy products continues to improve, reports Rabobank in its December 2009 "Agribusiness Review.”

The international bank says economic indicators are gradually picking up, and buying has at least stabilized in some markets heavily impacted by the global financial crisis. In addition, Chinese import buying remained vigorous at least through October.

At the aggregate level, however, the improvement in dairy buying is considered gradual at best, and still distinctly fragile, "given the sluggish rate of improvement in economic activity, the skittishness of financial markets and anecdotal evidence that wholesalers have largely refilled pipelines,” says Rabobank.

Most of the impetus for recent price increases probably comes from supply constraints, Rabobank says. The most recent data show milk production stagnant or falling in all key export regions.

Despite product scarcity in global markets, "the staggering jump in commodity prices in recent months has raised concerns that the market is now at risk of overshooting price levels that would be sustainable over the next 12 months,” the bank says.

Rabobank also believes current spot prices for dairy, if they hold, could exert pressure on demand as the increased cost of ingredients feeds through foodservice and retail markets.

"Strange as it may seem, exporters and their suppliers may well be best served if the market at least started to stabilize now,” the report says. "Each further increase in commodity pricing from here will only increase the prospect of another steep boom-bust cycle, which is not likely to serve anyone's interest well.”

The bank's report was prepared by Rabobank's Food & Agribusiness Research and Advisory division and its team of analysts from Australia, New Zealand and around the world.

Read Rabobank's latest report: 2010 FAR Outlook

Back to news


 

Comments

 
Spell Check

No comments have been posted to this News Article

Corn College TV Education Series

2014_Team_Shot_with_Logo

Get nearly 8 hours of educational video with Farm Journal's top agronomists. Produced in the field and neatly organized by topic, from spring prep to post-harvest. Order now!

Markets

Market Data provided by QTInfo.com
Brought to you by Beyer
Close