Milk price triggers in foreign markets

Milk prices have reached record levels on the international market, influenced by drought in New Zealand, the main exporter in the world, and the Chinese buyers by delivering the product. Milk costs are passed on to other dairy products, which amplifies the high impact on consumer prices.
The referential price of milk export New Zealand climbed 62 percent since the beginning of this year and hit a record this week, in the wake of the biggest drought in the country in three decades in terms of affected area. The North Island, which produces most of the milk from New Zealand, is among the areas that suffer most from the drought, according to the country's Government.
"Almost all farmers in all parts of the North Island are facing conditions of aridity, very difficult," said the New Zealand Minister of Primary Industry, Nathan Guy last week. The New Zealand is the largest milk exporting country in the world. Accounts for 60% of international trade of whole milk powder, the most marketed of the commodity, according to data from the u.s. Department of agriculture (USDA).
Tim Hunt, strategist at Dutch Bank Rabobank specializing in dairy products, provides that the production in the last few months of the current season will be between 15% and 20% lower than in the previous one. "The New Zealand goes through a severe drought".
At the same time, buyers in China, the largest importing country, have stepped up the search in the midst of a harsh winter that reduced domestic production and changes in eating habits, which became more Westernized and more nutritional content, which stimulated the consumption of dairy products. In January of this year, imports of Chinese Lam were about 70% higher than in the same month last year, according to information provided by Hunt.
In the most recent auction held this week by the New Zealand co-operative Fonterra, the world's largest dairy group, the price of whole milk powder rose 21% to record $ 5,116 per tonne. "There have been disputes to ensure, before the end of the season, the limited supply of New Zealand," said economist With Williams, specialized in agricultural sector in ANZ.
The increase in prices will affect large importers of milk, and more directly, to China. Other major consumers such as the United States and Europe, are largely self-sufficient, but the recovery of international prices of milk also may impact them and pressing your home prices, since export becomes more attractive to local producers, according to Hunt.
"The high tide raises all boats. Will push up wholesale prices and lead to widespread high pressure in retail markets ". Hunt noted, however, that the impact on the retail price of dairy products will be much smaller than the wholesale prices, since a large part of the increase is absorbed by food companies.
"The Economic Outlook, particularly in the European Union, makes it extremely difficult to pass on price increases without seriously impacting their volumes [of sales] in 2013," said Hunt.