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Milk Prices at Record High

Market conditions have never been better for Icelanders to export powdered milk, and if the ISK drops, as forecasts indicate, then circumstances only stand to improve, reports Morgunbladid.

These conditions have been brought about by recent large increases in the world milk prices, which has now reached a historical high. According to the US Department of Agriculture the price of butter has risen by 95% YTD while the price of powdered milk has risen by 71%.

These price hikes have been attributed to increased demand on the market for dairy products coupled with widespread drought in Australia, which is the world’s largest milk producer.

Although only 8% of all milk produced in the world is sold on the international market, a shortage of milk will lead to increased prices in all markets. Because increasing milk production is a time-consuming process, most indications suggest that the price will remain high for some time to come.

The increased use of grain to produce ethanol for ethanol-powered vehicles in the US and EU has also led to a higher cost for grain, which, in turn, creates higher costs for agriculture and higher costs for dairy production. Many predict that the use of grain to produce ethanol will have large effects on food prices throughout the world.

These recent hikes have reduced the price gap between Iceland’s dairy products and dairy products in neighboring countries quite considerably. Although dairy prices remain higher in Iceland, it is not unfeasible to export milk from Iceland. However, spokespeople for the Icelandic dairy industry consider it unlikely that Iceland will begin exporting large quantities of milk.

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