Peter Duggan, Strategic Information Services, Bord Bia

After a year in which the global dairy industry went through severe price declines, reflecting weak global demand, a recent report by Rabobank suggests that 2010 offers the prospect of more stable dairy markets.

The recovery in the dairy markets over the last couple of months has been helped significantly by reduced supplies in the Southern hemisphere, with little evidence that Northern hemisphere supplies will increase until at least March/April 2010, according to Rabobank. To highlight the recovery that has taken place, Dutch whey prices have risen by 71% to €650/tonne, since the beginning of 2009. A broad range of dairy commodities prices can be accessed from the Bord Bia website.

The IMF forecast that the global economy will grow by almost 3% in 2010. This combined with a shift in demographics is expected to help dairy consumption improve through 2010. A growing appetite for more Westernised diets is expected to lead to McDonalds planning to open 500 stores in China alone in the next three years. In response to the growth in urbanisation levels, exposure to chilled dairy products due to refrigerator ownership will be far greater.

However, in the regions dominated by large internal markets such as the US, the EU and Brazil, any additional milk produced in the short term is expected to meet the rise in local consumption levels.

For 2010, Rabobank expect that the dairy markets will be similar to late 2009. This is based on the following assumptions:

• Modest demand improvement
• Small reductions in export supplies from 2009 levels
• A gradual sell off of EU intervention stocks to world markets
• A modest softening in Chinese import volumes