Weaker Dairy Prices Come Too Late to Slow Northern Hemisphere Milk Output, Rabobank Says

March 21, 2012 10:16 AM

International bank says demand will remain compromised by weak underlying economic conditions.

The opening months of 2012 saw international dairy prices fall from 3% to 8% across the complex, extending the run of gradual price softening to a year, Rabobank said in its March 2012 Dairy Quarterly released this week.
Economists with the international bank reported that unusually good weather across most regions exacerbated the impact of high farmgate milk prices, driving supply growth too fast for battered Western consumers to soak up, even with support from solid international demand.
The second quarter of 2012 is likely to see further downward pressure on world prices, Rabobank said. Expected declines in farmgate prices will come too late to slow production growth much in the Northern Hemisphere this spring. Moreover, demand will remain compromised by weak underlying economic conditions and only modest price relief for consumers.
“Fundamentals should begin to rebalance as we progress through [the second half of 2012,] though there is a risk of only weak price support at that stage given the prospect of significant stock accumulation in coming months if we have a strong Northern Hemisphere supply peak,” the report noted.

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