Dairy prices rise in Malaysia

The increases in dairy raw material prices may potentially drive up prices of dairy products if the high commodity bill continues.

An analyst said there had been significant increases in raw material prices in the past six months and, based on the current outlook, he expected commodity prices to stay high this year. He said the high prices could potentially be passed on to consumers but did not give a threshold of commodity prices before milk prices would be increased.

According to reports, whole milk powder prices surged to a record at the GlobalDairyTrade auction early this month. The average price rose to US$4,958 a tonne. However, the price had dropped last week after the recent record high.

“We have seen a very sharp increase in the prices of milk in the past months. We foresee milk prices going up even further this year due to global demands and disruption in supplies,” Dutch Lady Milk Industries Bhd managing director Bas van den Berg said.

He said food industries in general already had a very challenging 2010 with many external factors contributing to it, affecting prices of raw materials and so on.

“Milk is food and, as is evident in almost every market, prices of food are on the increase globally. It will be inevitable to increase prices despite measures to boost output and efficiency.”

Dutch Lady controls some 25 percent share of Malaysia's total dairy market. The dairy company is also a market leader in ambient liquid milk and grow-up milk.

“The outlook for milk supply this year does not appear favourable due to the erratic world climate and weather conditions. Hence, it will drive up the prices of skim milk powder,” F&N Dairies (M) Sdn Bhd general manager, business development and corporate affairs, Poh Eng Lip said.

He said milk prices internationally would “remain high or go even higher” due to the erratic world climate.

“With natural disasters occurring around the globe, the developed and more affluent countries may increase their stockpile position, therefore pushing up the prices of skim milk powder,” Poh said.

F&N currently dominates the canned milk industry with about 65% share for sweetened condensed milk and about 80 percent share for evaporated milk.

The canned milk industry is valued at more than RM2.1bil.