Increasing oil prices could lead to stronger dairy prices around the world. Last week the Organization of the Petroleum Exporting Countries (OPEC) cut output by 1.2 million barrels per day. As a result oil prices have increased substantially pushing above the $50 per barrel mark. According to a story from Irish news service Agriland, improved oil prices could lead to improving dairy prices.
“The $50 per barrel price is the threshold at which most oil producers cover costs and become cash positive,” says Gabriel D’Arcy, LacPatrick CEO, according to Agriland. “This increases their purchasing power and consumption which is positive for dairy consumption. But it will take some time and a sustained $50/barrel price plus to generate this demand.”
OPEC countries include Algeria, Angola, Ecuador, Iran, Iraq, Kuwait, Libya, Nigeria, Qatar, Saudi Arabia, United Arab Emirates and Venezuela. Because of the low price of dairy products, OPEC countries were able to purchase dairy products despite low oil prices.
In 2015, those countries purchased 1.38 million tons of dairy products. Whole milk powder lead the pack of commodities purchased followed by skim milk powder. It’s no surprise liquid milk was the least purchased dairy product in the OPEC region.
By: Anna-Lisa Laca