A Russian ban on farm and dairy imports has sent dairy prices spiraling, but the CEO of the world's largest dairy producer expects conditions to normalize by March.
The U.S. and European Union have taken various sanctions against Russia following its annexation of Crimea in March and its support of pro-Russian separatists in the region. Russia retaliated in August, banning a range of farm imports from the EU and U.S. Coupled with pent-up milk inventories in China, the ban sent global dairy prices down 44 percent year to date.
"There are so many geopolitical issues around the world that are affecting demand at this point in time that prices have dropped to where they are, [but] I believe that the situation around dairy will strengthen," said Theo Spierings, chief executive officer of Fonterra.
"We are a bit stronger in our forecast than other people because we believe dairy commodities will come back to normal levels sometime around March next year," he added.
While Fonterra does not export directly to Russia, the import ban's impact on the global dairy scene is hurting the company, Spierings said. Russia's ban on European cheese imports is problematic, as the demand for New Zealand milk, which is used in the production process, has fallen dramatically.
"A third of New Zealand's milk pool… needs to find a home. That is affecting the global trade scene tremendously," he added.