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Global dairy markets face more volatility

Rabobank global strategist Kevin Bellamy said none of the major issues in world markets have been resolved

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Global dairy markets face more volatility #teamdairy

Global dairy markets should be prepared for further volatility according to Rabobank.

 

Slowing demand from China, the Russian trade ban and the strong US dollar have had a major effect on the global dairy trade and the removal of European milk quotas led to a rise in production which drove down prices.

 

As production stabilises across Europe, Mr Bellamy warned price volatility is likely to continue.

 

Rabobank global strategist Kevin Bellamy said: "The trade in dairy products has suffered a number of massive blows in the last three years."

 

"Looking forward, none of these issues has been resolved.

 

Issues

 

"The Russian ban will be in place at least until 2017. Demand from China will continue to grow but at a slower rate, oil prices are forecast to remain at around the USD 50 per barrel mark, and the dollar is forecast to maintain its high value against other currencies."

 

However, the growth of export surpluses is expected to slow.

 

"New Zealand production growth will struggle as land availability becomes a limiting factor and in Europe, once production levels have stabilised after the removal of milk quotas, there is no preparation for ‘further’ strategic expansion which would require new land, infrastructure, and processing investment," he said.

China

 

China’s dairy consumption has continued to grow but the rate of growth has slowed as Chinese economic growth has eased.

 

Mr Bellamy said: "The Chinese will continue to be major importers of dairy products for the foreseeable future as local supply growth continues to face constraints.

 

"China will find a ’new norm’ which is likely to mean lower volume growth but more focus on value."

 

Political instability is also expected to have a big impact on prices following the US elections, Brexit and an uncertain future for trade deals. The lifting of the Russian trade ban could also be affected by deteriorating Russian relations.


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