(Yicai Global) July 12 -- Foreign dairy products are expected to remain expensive in China as output has been cut in New Zealand and Europe, according to analysts.

Global dairy product prices edged up 4 percent in June from May and jumped almost 25 percent from a year ago, according to the latest statistics from the Food and Agriculture Organization of the United Nations. Meanwhile, food prices fell for the third straight month, still remaining close to a historic high recorded in March. The mismatch points to regional shortages.

The rising dairy prices are caused by the supply side, Xie Wen, a futures analyst at Wuchan Zhongda Group, said in an interview with Yicai Global. New Zealand, a major dairy producer, has been reducing its raw milk output because of the drought and cold weather since last year, she said.

Dairy products have a long production cycle, so it will take time to fill the gap, Xie said. Prices are likely to stay high for some time, which will affect downstream industry chains and consumers, she added.

New Zealand’s milk output fell 6 percent in the first quarter to the lowest levels since the first quarter of 2013, per statistics from the US Department of Agriculture. The output will drop in the island country in the southwestern Pacific Ocean this year because of the prolonged drought, reduced livestock inventories, and continued labor shortages, the USDA predicted.

A heatwave has struck another major dairy-producing area in Europe this summer, making the sluggish production prospects even gloomier, Xie added.

The USDA offered estimates for Europe too. The 27 member countries of the European Union will produce 144.6 million tons of milk this year, down 434,000 tons from last year and 836,00 tons less than in 2020, it said.

Fonterra Cooperative Group, the world’s largest exporter of dairy products, forecast recently that milk prices will hit a record high amid supply shortages and strong global demand. Last month, the Auckland-based company upgraded its prediction to pay farmers 50 New Zealand cents (30 US cents) more for a kilogram of milk solid in the 2022-2023 financial year.

Editor: Emmi Laine, Xiao Yi