Concern about international dairy prices

International dairy prices have decreased significantly since the beginning of 2014. This was the result of, among others, predicted higher production in exporting countries, following the increase in producer prices in 2013. In addition, demand, particularly in Asia, was offset by Russia’s recent ban on the importation of EU dairy products resulting in the build-up of intervention stocks in the EU. This has already resulted in lower international prices. At the Fonterra sale of 2 September, prices decreased by an additional 6%. If this crisis is not resolved quickly, it may lead to higher supply on markets outside Russia and result in further price decreases. This, however, is not expected to affect South African producers directly, as current producer prices are still safely below import parity.