Market report: Higher output could dampen dairy prices

The recent rises in dairy commodity markets could be eroded by a sharp increase in milk output across key production areas this season.

Some of the largest milk producing countries have started to respond to improved market conditions, despite a slow start to the year, according to DairyCo.

US production in June was 2.4% higher than 2009, while EU production in May was 0.8% up. That compares with just a slight increase in production at the start of 2010.

New Zealand’s Ministry of Agriculture recently forecast that milk production there could increase by 14% in the 12-month season starting May 2010. Australian production was also likely to increase after a 3.3% fall last year, DairyCo said.

“With the northern hemisphere now in seasonal decline, the southern hemisphere will play a key role during the autumn. This could have the potential to dampen any future rises in commodity prices on the world market.”