Most of the extra milk will be consumed in the places where it was produced, because of rising domestic demand. However, greater milk output is still putting pressure on world dairy markets, which account for only about 10% of world milk production. Prices for butter, cheese and milk powders have reached record levels this summer. Butter, for example, has risen by 60% to $2,000 per tonne, while skim milk powder is up by one third to $2,200 per tonne. These levels, however, now appear to be peaking.
Extra supplies on offer from the EU, the US, Australia, New Zealand and Argentina are encouraging buyers to delay purchases in the hope that prices will start to fall. This will be bad news for suppliers, especially in the EU, where big cuts in export subsidies are already making them less competitive.