Dairy trade drop expected

Growth in dairy trade is expected to slow slightly in the next three years on the back of a strong United States dollar, low oil prices, Russian trade embargo and slowing Chinese growth.

In a recent industry report, Rabobank global strategist dairy Kevin Bellamy said the trade in dairy products had suffered some ''massive blows'' in the past three years and was set to continue facing headwinds.

None of the issues had been resolved; the Russian ban would be in place at least until 2017, Chinese demand would continue to grow but at a slower rate, oil prices were forecast to remain at about $US50 per barrel, and the dollar was forecast to maintain its high value against other currencies.

As a result, dairy trade was likely to grow at a slower rate than in recent years, driven more by population growth than per capita consumption increases.

Further, New Zealand expansion was limited by land availability, Europe was stabilising after milk quota removal, and US export ambitions were limited by domestic demand growth and the strong US dollar.

Dairy trade was also likely to remain dominated by regional rather than global routes with free-trade agreements significantly influencing volumes.

The exception would be Asia, which would continue to be a highly competitive ''battleground'' for exporters from around the globe, he said.

Added to the above was the potential for the renegotiation or cancellation of trade agreements following the US election.