GOVERNMENT farmer support tools in competing dairy supply countries may have taken some of the pressure off declining returns in Australia but the polices will also likely dampen the rate of recovery.
Big agribusiness lender Rabobank's Dairy Quarterly reports intervention buying in the northern hemisphere has served to sustain global dairy prices and opened a window for exporters in Oceania to increase shipments through the first quarter of 2009.
Australian exporters were able to increase exports up to 30 per cent in the three months to April, clearing stocks and paving the way for some recovery from a global situation that has seen farmers faced with farmgate prices of up to half that of last year's.
But Rabobank's senior analyst Tim Hunt, Melbourne, said the dairy products stockpiled in warehouses by United States and European Union governments will at some point have to find its way back into the market, so any recovery in the next quarter is likely to be slow.
Combined with strong import buying from China, the northern hemisphere intervention policy has played a crucial role in providing a market floor for dairy products with the two adding up to just under 200,000 tonnes of milk powder or around 25 per cent of normal international trade volumes in those products, Mr Hunt said.
It has been a significant factor in the global dairy game this year as decreasing milk production on the back of poor milk prices and high input costs has not been enough to offset the very weak demand created largely by the economic crisis.
There was hope that fundamentals would begin to turn in favour of sellers late this year with demand benefiting from improved availability of credit, rising incomes and lower pricing in some key markets, Mr Hunt said.
However, dairy export market opening prices to farmers for this season would still be well below opening prices for the past two years, he predicted.
And the large divergence in returns between those supplying the export market and those meeting the fresh milk requirement domestically would continue for some time.
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