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New era dawns in global dairy market

Rural News
New era dawns in global dairy market

The global dairy market has entered a new era with growing world consumption of dairy products, combined with reducing growth in supply, expected to underpin sustained higher, though volatile, prices into the future, according to a recently-released industry report. The report by leading agribusiness lender Rabobank, says despite current short-term challenges facing the sector "“ including a recent moderation in dairy commodity prices "“ the medium to longterm outlook is robust, with the market for dairy moving into a fundamentally changed era."In this new era, global demand for milk at any price point has shifted upwards, based on income growth in many parts of the world, and favourable demographic and cultural trends that have increased the number of people that are aware of dairy, have access to dairy, want to consume it and can afford to do so," the report says.  With an anticipated recovery in world demand for dairy expected to commence in late 2009 and beyond, New Zealand will be in a good position to help provide much-needed additional world supply in the coming few years, the report says. "NZ is expected to generate a substantial increase in supply as its 2008/09 season builds," Ms Moynihan says. "After a slow start, supply is expected to bounce back from the recent drought as farmers respond to higher milk prices and with approximately 300 new dairy farms commencing operation after widespread conversion of sheep farming land."Further strong growth is expected for 2009/10 as additional conversions come on line and conversions from recent years build to average productivity levels. Rabobank remains convinced that the medium-term equilibrium price for dairy products has shifted upwards from its long-term average. Economic growth and cultural changes have substantially increased the price the market will pay for milk."

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