DAIRY prices have rebounded to levels not seen since before the global financial crisis wiped the cream off farmers' upper lips and bottom lines.
Butter prices have more than doubled from a low $US1750 a tonne in March to $US3500/tonne last week.
- Are you optimistic about the dairy outlook?
- Have your say in the form below
Even with a strengthening Australian dollar butter prices have still surged 61 per cent, from $2361/tonne in June to $3804/tonne last week.
While prices have not reached the dizzying heights of late 2007, they are now at far more sustainable levels, according to Dairy Australia trade and strategy analyst Chris Phillips.
"In recent times there seems to have been a shortage of butter oil, which may be tied to US production falling away," Mr Phillips said.
Milk powder prices have been slower to recover, but are still making big gains.
Skim milk powder prices have jumped 77 per cent, clawing back from a low of $US1750/tonne in February to $US3100/tonne last week.
In Aussie dollar terms, SMP prices have still surged 43 per cent, from a GFC low of $2432/tonne to $3478/tonne.
Mr Phillips said Chinese demand for imported milk powders was strong despite last year's contamination of infant formula by Chinese dairy processors that led to the death of six babies and hospitalisation of 860 more.
"It (China) has a strong preference for imported product, which is holding up quite well," Mr Phillips said.
"Especially given they're bearing the full brunt of higher prices in US dollars, given the yuan (exchange rate) is tied to the US dollar."
He said the impacts of the global surge in dairy prices had been softened for many importers whose currencies had appreciated against the US dollar, helping sustain demand.
Mr Phillips said the market was still nervous about the future impact of European and US Government-owned skim milk powder stockpiles. He said the EU stockpile was about 250,000 to 350,000 tonnes.
In contrast, stockpiles of butter are just 80,000 tonnes on the back of million tonnes of global annual trade. No major stockpiles of whole milk powder are held due to its perishability.
An analysis of global cheese prices shows they have made a strong rally, jumping 51 per cent in US dollar terms, from $US2450/tonne in March to $US3700/tonne.
But a plot of cheese prices in Australian dollars shows a recovery of just 23 per cent, from a low of $3293/tonne in June to $4073 this week. In the heady days of the global commodity boom cheddar cheese prices peaked at $US5500/tonne compared to $6155.
But despite the recent gains Mr Phillips warned there would be a lag of up to six months before Australian dairy exporters could pass on the price gains to local dairy farmers.
He said local exporters also faced the uncertainty of further gains in the Australian dollar against the greenback, which could further erode recent gains.
