Rabobank Dairy Quarterly

Rabobank Dairy Quarterly

March 2011

Key highlights:

• International dairy commodity prices rose sharply through most of Q1 2011, before a sudden contraction wiped off around half the gains in mid-March.

• Pricing appears to have been initially squeezed up by improving demand, a poor Southern Hemisphere summer and a series of supply shocks in importing regions, before the devastating events in Japan rocked market sentiment, slashed grains futures, and sent dairy prices downwards.

• Assuming the Japanese nuclear crisis is brought under control, we expect that the net impact of the earthquake and tsunami will prove relatively limited for dairy.

• Much will depend on this, with other factors pointing to continued market tightness through Q2 2011, backed by improving consumption, ongoing shortages in key import regions and our expectations of a rebound in grain costs.

• Thus while sentiment may play a dominant role in setting market direction in coming weeks, Rabobank expects market fundamentals will reassert themselves and continue to sustain international prices at close to the levels evident in mid-March as we progress through Q2.

Full Report Available Here

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