Milk Prices Continue to Rise... Production Declines in Key Countries Including New Zealand

[Photo by TASS Yonhap News]

[Asia Economy Reporter Park Byung-hee] Major foreign media reported on the 20th (local time) that the prices of dairy products, which rose sharply last year due to Russia's invasion of Ukraine, continue to increase this year.

According to the Global Dairy Trade Index, the price of skim milk powder reached an all-time high of $7,111 per ton on the 15th. The price of whole milk powder also hit an eight-year high this month. Since Russia's invasion of Ukraine on the 24th of last month, dairy product prices have risen further.

Russia and Ukraine are major exporters of wheat and nitrogen fertilizers. Wheat, along with corn and soybeans, is a primary feed for dairy cows, and nitrogen fertilizer is necessary to cultivate these feed grains. Among dairy farmers, there are complaints that obtaining feed is becoming increasingly difficult and expensive.

An official from an Australian brokerage firm said, "Feed is ultimately the most important issue for dairy farmers," adding, "because feed costs account for 70 to 80% of total expenses."

Fonterra, New Zealand's dairy giant and the world's largest dairy exporter, announced last week that the price paid to dairy farmers for milk has risen by more than 30% compared to a year ago. Fonterra added that prices are expected to rise further. Miles Hurrell, CEO of Fonterra, said, "The war in Ukraine has complicated an already difficult operating environment due to COVID-19, affecting supply chains, raw milk prices, and grain supply."

The surge in gas prices caused by Russia's invasion of Ukraine and supply chain disruptions due to COVID-19 are impacting milk production. According to commodity brokerage StoneX, the total milk production of five major milk-producing countries?New Zealand, the European Union (EU), Australia, the United States, and Argentina?in January this year decreased by 1.7% compared to January last year. Milk production in these five countries also declined last year. In particular, New Zealand and Australia's milk production dropped by more than 6% last year.

New Zealand, which accounts for 35% of the world's milk exports, is called the Saudi Arabia of the milk market. This is because its influence on the milk market is as significant as Saudi Arabia's control over the global oil market. New Zealand and the EU together account for 70% of global milk exports.

This content was produced with the assistance of AI translation services.