Dairy stockpiles of no concern

Butter and milk powder stockpiles built up during the economic downturn are unlikely to substantially impact the current mini boom in dairy prices reports Rural News. Fonterra expects the EU and the US to dump dairy stocks on the market as prices pick up. But Fonterra chief executive Andrew Ferrier says the stockpiles are not large enough to make "˜a material difference' as global dairy prices rebound after hitting rock bottom late last year. "˜The dairy stocks will dampen the rise but won't drive the market down itself.' "˜When markets ended up getting a little bit tight, these stocks would come into the market and slow the rise, and when the markets started falling, they would build up these stocks and they would slow the fall. "˜But now we don't see huge Government-owned stocks in the EU and the US.' Commentators are cautioning farmers not to get carried away by the upswing and learn to manage business risks as there is a high likelihood of volatility. Agribusiness professor Keith Woodford, Lincoln University, says although commodity prices in general are now rising, the rises in international dairy prices have been spectacular. Woodford points out that when purchasers decide to build inventories then prices go up very rapidly. "˜Then, as soon as they get a sniff that prices might be declining, they hold back in their purchases and this accentuates the downturn,' he said.