Dairy farmer profits to hit record levels in 2025
The profitability of dairy farmers is likely to increase in the coming year, accordign to the latest report by the Ministry for Primary Industries (MPI) on the outlook for the primary sector.
WORLD FOOD prices fell for the first time in three months in January despite the dizzy heights of the dairy market and a recent rally in grains.
The United Nations’ Food and Agriculture Organisation’s food price index was down 1.3% last month compared to December and 4.4% below January 2013.
“We’re seeing lower prices due to abundant supplies, but stronger upturn in demand, such as an increase in the pace of imports from Asia, could limit the decline,” says FAO economist Abdolreza Abbassian.
Sugar, vegetable oils and cereals dropped 5.6%, 3.8% and 1.6% for the month and even meat, which had strengthened over the past few months, fell slightly in January.
“The only notable exception was a rise in dairy prices,” says Michael Griffin, FAO’s dairy and livestock market expert.
“The FAO dairy price index registered a 1.3% increase in January to 267.7 points, largely reflecting strong demand, especially from China, North Africa, the Middle East and the Russian Federation.”
The FAO noted bumper cereal crops last year meant cereals were 23% cheaper in January than a year ago and its latest estimate for world cereal production in 2013 was a record 2,502 million tonnes, up 8.5% from 2012.
The 2013 crop would help replenish global stocks to 573mt, 13.5% up on a year ago, giving a stocks-to-use ratio of over 23.5%, the highest since 2002/03. That compares to an all time low of 18.4%, recorded in 2007/08.
FAO says it also considers 2014 harvest prospects favourable, and pointed to the February market monitor report from the Agricultural Market Information System as further evidence of that.
The AMIS report says winter wheat conditions in the Northern Hemisphere have been good and Southern Hemisphere maize and soya crops are better than previously anticipated.
Last year’s record cereal production and rising stocks have already resulted in sharply lower prices which have stimulated demand and trade. FAO expects 321.4mt to be traded in 2013/14, 4% more than 2012/3 and a record volume, with consumption forecast up 92mt at 2,415mt, mostly due to increased use of coarse grains, maize in particular.
Prices for maize on the benchmark Chicago futures exchange hit a low of US$4.12/bushel in early January for March movement, but have since rallied to US$4.43/bu, a three-month high.
Wheat has similarly turned a corner, up from a low of US$5.50/bu in late January for the March 2014 contract, to US$5.85/bu last week.
High export volumes from major trading blocks were a driver in both rallies, and in the case of wheat, fears over crop condition due to cold in the US and Europe added to increases, despite an International Grains Council report raising its forecast for year-end stocks of wheat 9% to 188mt.
Meanwhile closer to home the ASX’s NSW wheat contract for March has firmed 10% since the turn of the year.
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