Monday, November 26, 2007

The new oil. 

Given that milk has been scarce in Venezuela of late Ultimas Noticias today gave a little chart which probably tells us a lot more about milk than we ever wanted to know:

Along the top we see Venezuelan milk production statistics for the past two decades. It doesn't take a lot of effort to see milk production hasn't gone anywhere - it has essentially been flat. This is not good, particularly considering that during those 20+ years Venezuela's population has been growing.

These numbers come from the Venezuelan government. For the past three years it hasn't released actual production statistics but has simply stated that production has grown 8% each of those years. Hence, Ultimas Noticias did the calculations which show that if true Venezuela should be producing 1.5 billion liters per year.

However, that number is disputed by the dairy farmer association which claims production is more like 1.2 billion and that production has fallen over 13% in during the past 10 years.

Regardless, Venezuela's milk production is insufficient to meet demand (which in a major ommision isn't given in this chart but it has been going up significantly) so the difference is made up by imports. According to these statistics Venezuela now imports almost half its milk.

As fate would have it, right now is NOT a good time to need to be importing lots of milk. One normally doesn't think of milk as a scarce or valuable commodity but lately it is. Witness this article:

In a growing world, milk is the new oil

HAMILTON, New Zealand: After years of saving, Geoff Irwin finally scraped up enough money to buy his parents' dairy farm near here in 2003. Now his parents have retired to a house nearby and Irwin, 45, runs the farm with its 300 cows.

It is hard work, 12 hours a day, but already it looks as though it has paid off: Just four years later, the farm is worth more than twice what he paid for it. Prices for dairy farms in New Zealand are soaring along with dairy incomes, thanks to a global milk boom.

"It feels really good," Irwin said. "It feels like we're going to be earning and be rewarded the way we should."

Driven by a combination of climate change, trade policies and competition for cattle feed from biofuel producers, global milk prices have doubled over the past two years. In parts of the United States, milk is more expensive than gasoline. There are reports of cows being stolen on Wisconsin dairy farms.

"There's a world shortage of milk," said Philip Goode, manager of international policy at Dairy Australia in Canberra.


"No one forecast this rapid shortage of milk," said Torsten Hemme, head of the IFCN center.

This is not good if you are in the market for milk. Pizza parlors and ice cream vendors are raising their prices. Starbucks has raised the price of its drinks. Raising the price of its candy bars didn't stop milk prices from pushing Hershey's profit down 96 percent in its latest financial year. Milk is also weighing on profits at Cadbury Schweppes and at Kraft Foods' cheese unit.


Australia, a major exporter, is suffering a multi-year drought that has devastated its milk production by killing off the grass that milk cows eat. Many in Australia worry that, far from being a temporary problem, the drought is the result of global warming and that dairies will never be the same.

At the same time, rising demand for biofuels is pushing up the price of corn and other grains, which is what farmers in the United States, Europe, Canada and Japan use to feed their cows instead of grass. Rising feed costs are therefore helping to push milk prices even higher. Production is growing in emerging markets like China, but demand there is growing even faster. The average person in China now consumes more than 25 liters, or 6 gallons, of milk a year, up from 9 liters in 2000, according to IFCN. So while China is now one of the world's top milk producers, it is also the world's largest milk importer.

In other emerging markets, rising prices have prompted governments to step in to control prices. In Argentina, for example, the government has imposed a tax on dairy exports. India, the world's largest milk producer, this year banned exports of milk powder.

Rising milk prices are contributing to accelerating inflation worldwide, from Brazil to Australia, vexing policy makers and sparking allegations that there is more behind it than supply and demand. The authorities in South Africa are investing allegations of price-fixing in the country's milk market; in Germany they are looking into the rising prices of milk and butter; and the U.S. Congress has started an inquiry into alleged price-fixing in the nation's market for cheese

Well, seeing as Chavez is into barter arrangements maybe he can start sending tankers of oil to New Zealand and have them come back full of milk. A barrel of oil for a barrel of milk. Sounds fair to me.


This page is powered by Blogger. Isn't yours?