Water Week

EWN Publishing

Milk-powder prices soar 70pc in 2007; wheat, other grains at near-record: growing China, India demand

Posted by waterweek on 11 October 2007

The prices of dairy products, especially milk powder, have led other soft commodities with gains of up to 70 per cent so far this year, and wheat and other grain prices were also at a near record, wrote David Potts in The Australian Financial Review (10/10/2007, p.31).

Similar to resources-boom: “In fact the only soft commodity that has, well, gone soft is sugar after a run earlier this year, and even then there are signs it is picking up again. It turns out to be a similar story to the resources boom – growing demand from China and India. Just as iron ore, nickel and natural gas are supplying the homes, factories and power of China, Western food is filling its stomach. Wheat, barley, beef and milk powder provide protein that is becoming affordable to a less impoverished population.” “People’s biggest increase in food consumption comes at relatively low income levels,” said Tobin Gorey, commodity strategist at the Commonwealth Bank of Australia. “Consequently, from current low income levels, food will be one of the first types of consumption to rise as China and India grow.”

Limited investor opportunity: More problematic were the limited opportunities for investors, rather than professional speculators, to hop on board. The most direct way was through futures contracts traded on the Sydney Futures Exchange, which covered everything from pork bellies to greasy wool and wheat. Except there were no dairy futures contracts. There was a live cattle contract, but that was more beef than dairy.

The Australian Financial Review, 10/10/2007, p. 31

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