Text size:

  • Small
  • Normal
  • Large

Milk price puts pressure on local dairy products

Gulf dairy retailers are under pressure from rising global milk prices, which have jumped by 60 per cent since August.

Droughts in big milk-producing countries including Australia have also contributed to higher prices. Australia is in the grips of its worst dry spell on record, which is hurting agricultural output. The rising cost of goods used to make dairy products is cutting into bottom-line profits, said Amr Farghal, the general manager for Fonterra Middle East. "We're buying full cream milk powder, skim milk powder, milk protein concentrate, bulk cheese, and on all these items the prices have increased dramatically," he said. "It is putting a lot of pressure on our overall financial performance." World food commodity prices rose to record highs last year, driven in part by rising demand and surging oil prices. Those costs began to fall from their peaks as the global economic downturn took hold. However, dairy prices have rallied again this year, surging 70 per cent between January and November, the Food and Agriculture Organisation price index showed. The steepest rise came in the fourth quarter between September and November according to the index, which is based on a basket of globally traded dairy products. Still, prices may have risen too far too quickly, the Dutch financial services firm Rabobank said in its Dairy Quarterly report. "The market is now faced with the possibility that pricing may have overshot levels that will prove sustainable through 2010, as supply and demand start to respond to extreme price levels," Rabobank said. "However, inherent lags, particularly on the supply side, reduce the prospects of a meaningful correction until beyond the first quarter." While many regional producers have in-house farms to produce fresh milk, others must import dairy products such as milk powder and whey to make foods including cheese and yogurt. The rising cost of raw materials puts pressure on dairy producers to raise retail prices to recoup their costs, said David Edwards, the managing director of the market research firm IMES Consulting Group. Steep gains in the price of staple foods such as milk in the Emirates are monitored by the Ministry of Economy, Mr Edwards said. The ministry signed agreements with retailers such as Lulu and Carrefour last year to keep the prices of key foodstuffs at 2007 levels. This causes producers to get caught between market forces and government regulation, Mr Edwards said. Hussam Abdul Qader, the general manager of marketing for the Almarai dairy company, based in Riyadh, said it had felt the pinch of rising commodity prices this year but had not raised retail prices. "We are not panicking yet," he said. "We will see where this trend is going and are not passing the cost to the consumer until we know." @Email:aligaya@thenational.ae

Back to the top

More articles

Editor's Picks

 The Greens, villas: Q1 no change. 3BR - Dh210-250,000. 4BR - Dh210-260,000. 5BR - Dh220-300,000. Q1 2013-Q1 2014 5% rise. Pawan Singh / The National

In pictures: Where Dubai rents have risen and fallen, Q1 2014

Find out how rental prices in the prime locations in Dubai have altered during the first three months of the year and the current rates you will pay according to data provided by Asteco.

 Above, the private pool of Ocean Heights' five-bedroom penthouse flat. Courtesy Christie’s International Real Estate

In pictures: Penthouse flat is height of Dubai luxury living

A five-bedroom penthouse in Ocean Heights in Dubai Marina is on sale for Dh25 million and comes with a private pool and an unparalleled view of Dubai.

 The cooling towers of the Temelin nuclear power plant near the Tyn nad Vltavou in Czech Republic. The country wants to continue expanding nuclear energy capacity despite cancelling a tender to build two new units. David W Cerny / Reuters

In pictures: Best business images for the week to April 17, 2014

Here are some of the best business images for the week to April 17, 2014.

 Three generations of the Hakimi family tend to their stall Crawford Market in Mumbai. Subhash Sharma for The National

In pictures: Shopper’s delight at Crawford Market in Mumbai

Crawford Market is an old British-style covered market dealing in just about every kind of fresh food and domestic animal imaginable. Later on renamed Mahatma Jotirao Phule, the market remains popular among locals and visitors by its old name, taken from Arthur Crawford who was the first municipal commissioner of the city.

 The Wind, Energy, Technology and Environment Exhibition takes place from April 14 to April 16. Above, the Dewa showroom during last year’s Wetex. Jaime Puebla / The National

April corporate and economic calendar for the UAE and overseas

From Cityscape to Wetex to stock-market holidays to nations reporting first-quarter GDP figures, here is our helpful calendar of April's business events in the UAE and internationally.

 Get the latest information on credit cards, bank accounts and loan products in the UAE. Mark Lennihan / AP Photo

Rates report: Latest on UAE loans, accounts and credit cards

Souqamal.com brings you the latest interest rates on banking products in the UAE.


To add your event to The National listings, click here

Get the most from The National