Drought could push global dairy prices up - ADC -

There could be a silver lining in the drought for dairy farmers, with lower milk production in Australia and New Zealand tipped to push up global milk prices.

The Australian Dairy Corporation says the drought and positive signs from European Union on trade subsidies will force milk prices higher, but the bad news is the increases are unlikely to counter the crippling affects of the drought.

The Dairy Corporation's Chris Phillips says it could be three years before the industry fully recovers from the drought, but in the long term, the future is looking brighter for dairy farmers. “We always argued that what we saw in 2002 was an over-shoot on the down side, and the prices collapsed a hell of a lot more than they needed to.

“But we think there's still scope for them to recover more in the first half. The good factors behind that are that the EU are seriously looking at their export subsidy levels and looking at cutting them going forward. So we think in the first half of the year there's scope for further improvement in powder prices and probably at a lower level - for cheese and butter.”