Soaring demand from emerging economies and rising production costs mean cheap food is history, says Dr David Dobbin
Food inflation is in the news and prices are moving up in dairy accordingly. February's United Dairy Farmers milk auction, a reliable barometer, saw prices at an all-time high for the time of year at 29.88 ppl.
Over the past year, international dairy markets have yielded returns well ahead of the UK and Irish markets and are currently ahead of the record levels of 2007. Growing global demand, reduced milk production caused by adverse weather in New Zealand and Australia, higher feed costs limiting US dairy output, and large Algerian powder purchases possibly related to the instability in the region have tightened the EU dairy market and mopped up any free whole milk powder stocks.
International dairy markets are expected to remain tight until this year's EU spring flush. But longer term, global demand for dairy products is predicted to rise by more than 2% annually over the next decade as the world's population steadily grows.
Most of this growth will come from developing economies in Asia, China, South America, Russia and Eastern Europe. For the first time developing and increasingly affluent economies that cannot keep up with their own demand can afford to compete against mature Western economies for the available world food supply.
Generally, the emerging economies escaped recession, whereas in the UK and Ireland, the downturn, higher taxes and inflation, led to a significant increase in deep-cut activity in dairy and a reluctance to pass on cost increases to consumers.
Looking ahead, limited water and other environmental factors will constrain milk production in many regions. The increasing costs of feed and fertiliser will put a ceiling on future milk output, while wheat and crop prices are now tending to follow the oil price, with ethanol distillation from corn and biodiesel and biomass fuel production now making crops an energy food source.
In the short term, farmers around the world will probably increase output in response to higher produce prices.
The long-term outlook is a different matter. Higher food prices are clearly an emerging trend.
Dr David Dobbin is is group chief executive at United Dairy Farmers and Dale Farm.
Food inflation is in the news and prices are moving up in dairy accordingly. February's United Dairy Farmers milk auction, a reliable barometer, saw prices at an all-time high for the time of year at 29.88 ppl.
Over the past year, international dairy markets have yielded returns well ahead of the UK and Irish markets and are currently ahead of the record levels of 2007. Growing global demand, reduced milk production caused by adverse weather in New Zealand and Australia, higher feed costs limiting US dairy output, and large Algerian powder purchases possibly related to the instability in the region have tightened the EU dairy market and mopped up any free whole milk powder stocks.
International dairy markets are expected to remain tight until this year's EU spring flush. But longer term, global demand for dairy products is predicted to rise by more than 2% annually over the next decade as the world's population steadily grows.
Most of this growth will come from developing economies in Asia, China, South America, Russia and Eastern Europe. For the first time developing and increasingly affluent economies that cannot keep up with their own demand can afford to compete against mature Western economies for the available world food supply.
Generally, the emerging economies escaped recession, whereas in the UK and Ireland, the downturn, higher taxes and inflation, led to a significant increase in deep-cut activity in dairy and a reluctance to pass on cost increases to consumers.
Looking ahead, limited water and other environmental factors will constrain milk production in many regions. The increasing costs of feed and fertiliser will put a ceiling on future milk output, while wheat and crop prices are now tending to follow the oil price, with ethanol distillation from corn and biodiesel and biomass fuel production now making crops an energy food source.
In the short term, farmers around the world will probably increase output in response to higher produce prices.
The long-term outlook is a different matter. Higher food prices are clearly an emerging trend.
Dr David Dobbin is is group chief executive at United Dairy Farmers and Dale Farm.
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