Drought in the United States, less favorable conditions in Europe, an uncertain El Niño and a decrease in New Zealand pay prices have increased supply challenges in the year ahead.
After 16 months of steady price declines, the global dairy markets are on the rise again. The world’s appetite for dairy products hasn’t abated, while a slowdown in milk production growth in the United States and Europe this summer has put a squeeze on the international market. Supplies are expected to be snug well into 2013, pointing to continued strong prices ahead.
This represents a reversal from the first half of 2012, when surging milk production among leading dairy exporters overshot consumption. Lower prices were necessary to clear markets, especially large New Zealand inventories. However, severe drought in the United States, less favorable conditions in Europe, an uncertain El Niño and a decrease in New Zealand pay prices have increased supply challenges headed into 2013.