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Archive for Saturday, August 11, 2007

Milk prices at record high as Asians consume more dairy, supplies limited

August 11, 2007

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— Got milk? Well, you're going to need more cash these days to get it.

Growing appetites for dairy in Asia and limited worldwide supply are among a number of factors driving prices of the dairy drink to record highs.

In China and elsewhere in Asia, chains such as McDonald's and Starbucks are introducing unfamiliar taste buds to cheeseburgers and lattes, increasing the region's demand for dairy.

Rising costs of animal feed, shrinking European production and long-standing drought in Australia and New Zealand, the world's largest milk-exporting region, are also pushing up the price.

Paying more for milk is causing an uproar in Germany, where families consider providing children with an affordable glass of milk a fundamental right. It is also a concern for consumers in the United States and elsewhere in Europe.

Milk prices hit a record last month in the United States, where consumers paid an average $3.80 a gallon, compared to $3.29 in January, according to the U.S. Department of Agriculture. It forecasts prices will remain high throughout the year.

Prices are likely to remain high worldwide until dairy farmers add more cows or shift production to powders, which are more easily traded than liquid.

International dairy prices increased 46 percent between November and April, with milk powder prices increasing even faster, according to the Food and Agriculture Organization.

Companies like candy giant Hershey Co. that use dairy for their products are feeling the pinch. But in many parts of the globe, dairy farmers are cheering.

"Global demand has been extraordinary for American dairy products, but global supplies of dairy products have been exceptionally tight," said Michael Marsh, head of the Western United Dairyman trade group in California, the top dairy-producing U.S. state. "From the American dairy farmers' perspective, you have almost a perfect storm."

In China, milk consumption has soared along with rising incomes, a massive expansion of the dairy industry and the increasing familiarity with - and taste for - nonnative foods among young urbanites.

China's growing love of dairy is a far cry from two decades ago, when the country was just opening up to foreign products and availability was limited to milk, yogurt and, on rare occasions, butter. The Dairy Association of China estimates consumption will rise by 15 percent to 20 percent annually in the coming years.

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