The outlook for international dairy commodity prices has deteriorated since the September 11 terrorist attacks on the US and may be slow to recover, according to New Zealand dairy concern Fonterra Cooperative Group, Industry Search reports this week.
International supply "pipelines" are generally full and buyers have been starting to take a wait-and-see approach in anticipation that prices might ease, Fonterra said in the October edition of its supplier newsletter.
"Sentiment being a powerful factor in markets, these buyer expectations have become a self-fulfilling prophecy," the newsletter said, adding that buyers know they are creating additional downward pressure on prices by delaying purchasing decisions.
Fonterra has annual revenue of $NZ 14 billion and accounts for one in every five of New Zealand's export dollars.
The newsletter didn't provide forecasts of how far Fonterra expects dairy commodity prices to fall.
World spot prices for butter ranged from $US 1350 to $US 1375 a metric ton in September, down from $US 1350 to $US 1400 a metric ton in July.
September's spot skim milk powder prices ranged from $US 2000 to $US 2050 a ton, down from about $US 2100 to $US 2150 in July.
Fonterra said the changed outlook is largely due to the aftermath of the September 11 attacks which increased uncertainty and the level of negative influences on global economic growth.
"In the past when prices have weakened in the international dairy markets, the main reason usually has been pressure from supply.
On this occasion, the main cause is a weakening of demand, which could mean the recovery will be slower," Fonterra said according to the Industry Search report.
There are no signs of a comprehensive price collapse despite the likelihood prices will be softer for at least the end of the 2002-03 season, the cooperative added.