28 Sep 2012

Global milk supply tightening - analyst

10:52 pm on 28 September 2012

A senior dairy analyst at Rabobank says after being awash with milk, the global market appears to be heading towards a period of scarcity of supply.

Hayley Moynihan says milk supply globally is slowing down dramatically in the United States and the European Union and it is expected that will affect dairy prices.

Ms Moynihan says low milk prices, high feed costs and poor weather conditions are driving the turnaround in production.

"The production influences are combined with the fact that we've come from a very strong period of product ... where milk prices were higher, feed prices were lower and producers around the world were willing and able to produce a lot more.

"The tide has completely turned now: drought in the United States, very high feed costs, lower milk production have all combined with bad weather in some other parts of the world as well to lower milk production.

"We expect that lower milk production growth will persist over the next six to 13 months.

"Over time it will result in higher milk prices, but not ... until we get into 2013," she says.