Exchange rate drama hits dairy products As part of the worldwide commodity price boom, much has been written about the high prices of butter, cheese and other dairy product commodities. What is ignored is the fact that in most EU markets this boom is over and wholesale prices have been falling since the beginning of this year. Price movement on EU dairy products has been downwards since January and this is being reflected in retail prices in mainland Europe, although the rate of decline varies a lot between different product sectors. The notable exception is the UK, thanks to the plunging value of Sterling against the Euro. On 10 April the value of the Euro rose above the significant marker of 80p, having rocketed more than 9% since the beginning of 2008. Sterling's weakness does not just affect UK holiday makers travelling to Europe but also UK dairy product prices. Imported butter and cheese prices, for example, should go up to compensate for the low value of Sterling, although this may take time to come through. At the same time, the fall in Sterling is to a certain degree protecting the current prices of UK-produced dairy products. Bulk butter prices in the UK have actually risen by about 5% in the past three months, mainly because of the currency effect, although the low level of UK milk production is also a factor. At the last count, UK milk deliveries to dairies fell 2.3% in the quota year to March, with March itself falling back by 3.1%. Cheddar prices have remained steady so far this year and imported supplies are having to bear the brunt of poor returns when converted into Euros. In the milk powder sector prices have weakened considerably on the Continent but, again, lack of milk and the currency effect have protected returns to UK producers. UK dairy product consumers should look to exchange rate effects on prices they pay rather than to the world boom in dairy commodity prices, which is largely over. Mike Bessey