Global dairy commodity prices are continuing to trend up, due to weather extremes in the main milk producing countries, says Rabobank.
This trend was expected to continue in coming months, with milk production likely to fall further in most key dairy export regions, the specialist agribusiness bank said in its latest monthly report.
Demand, on the other hand, was picked to increase.
"Key import regions will continue working through any accumulated inventories in the early months of 2013, preventing a surge in prices, however buyers will eventually need to re-enter the market," the report said.
In New Zealand, the withdrawal of fertiliser products containing the ingredient DCD, while not a health risk, had led to uncertainty for consumers. The need for testing regimes and regulations globally would take some time to address, Rabobank said.
Nationally, milk production was up about 5 per cent this season to date, but dry weather was taking its toll in the North Island with milk production now falling significantly.
"Milk flows are likely to start falling behind the prior year on a monthly basis from February onwards," the bank said.
In Australia, milk production was down 1.3 per cent in December, and year-to-date production was up 0.5 per cent year-on-year.
Milk flows in that country were expected to come in below expectations over the final months of the season, due to weather effects.
Floods were having a small negative impact in parts of New South Wales and Queensland, and a heat wave in southern Australia was impacting milk yields, Rabobank said.
- Fairfax Media