FAO’s Global Dairy Price Index, which consists of butter, skimmed milk powder (SMP), Whole Milk powder (WMP) and casein price quotations, dropped to an average of 229 points, following an average of 234 in February.
Despite the decrease, the latest figures show the dairy market is stable, a FAO spokesperson told DairyReporter.com.
“WMP prices dropped by 10 per cent, but this fall represents losses of recent gains,” he said.
Exports in March were at record high levels in volume terms, putting a cap on the upper trend observed in previous months, said the spokesperson.
Patty Clayton, a senior market analyst at DairyCo told this publication that the decrease in prices represented a natural peak of the supply and demand cycle.
She said there was also natural price decline as major US and EU markets move into their “spring flush”, the peak production period.
Future outlook
Going forward, markets will remain relatively strong, said Clayton, with a slight drop in prices and a shift between powders and fats.
The FAO spokesperson agreed that dairy prices should remain stable, although the future depends on what China does and how the northern hemisphere season develops.
“We don’t know what China will do this year, and it should be closely monitored,” he said.
The import surge from China in 2010 was an important element that kept world prices at high levels, said the spokesperson.
The WMP market is heavily dependant on the Chinese market, said DairyCo, which could import as much as 400,000t of WMP and 100,000t of SMP in 2011.
The IMF is warning of an 'abrupt slowdown' in China, although economic growth is still expected to be around 10 per cent this year, according to the organisation.
Patty Clayton, a senior market analyst at DairyCo told this publication that the melamine scandal in China had contributed to an increase in global dairy imports last year.
The Chinese milk industry is still struggling to restore confidence in its products after the 2008 melamine scandal which killed six children and sickened up to 300,000 across the country.