FAO food outlook report May 2012

International prices of dairy products are declining in the face of rising supplies. At the same time, import demand remains strong, keeping prices well above recent historical averages.

Milk and milk products market summary

Prices of dairy products began to decline in mid-2011, as supplies to the international market improved. In April, after a favourable outcome of the milk-producing season in the Southern Hemisphere and an equally positive opening of the season in the Northern Hemisphere, prices registered a further fall. The price slide reflected a rise in export availability but also a fall in the value of the euro against the US dollar. Yet, in spite of the recent drop, international prices for dairy products remain well above historical averages.

With publically financed inventories at minimal levels in the EU and the United States, the market is particularly sensitive to sudden changes in milk production and the availability of milk products. Nonetheless, the positive supply outlook for the rest of 2012 is likely to translate into further downward pressure on prices.

World milk production in 2012 is forecast to grow by 2.7 percent to 750 million tonnes. Asia is expected to account for most of the increase, but higher output is anticipated in most regions.

World trade in dairy products is foreseen to continue expanding in 2012. Demand remains firm, with imports anticipated to reach 52.7 million tonnes of milk equivalent. Asia will continue to be the main market, followed by North Africa, the Middle East, and Latin America and the Caribbean. Growing world import demand is expected to be met mainly through pasture-based milk supplies from Oceania and South America.

Read the whole report here