Prices current volatility is not beneficial for the industry, but a decrease of such volatility is expected to occur in the next months. Nevertheless, the last predictions indicate an even more acute stress on price decrease for milk as a raw material, consequently to the embargo imposed by Russia and to the highly influential part played by China on the international market. Therefore, in the event the European Union Farmers will not export on the Chinese market, at least within the Community the milk price  will fall to a historical minimum level, absolutely not foreseen one or two years ago. And since the Romanian farmers were, anyhow, overwhelmed by the situation, we foresee that a bleak future awaits them.   A global surplus At the beginning of the month of August, prices index of dairy products  traded on the GDT (Global Dairy Trade) platform, held by the New Zealand Fonterra Cooperative Group, was recording the minimum level of the last 2 years. Buyers seemed to be waiting, while the bid offer had gone up by 32%. Whole milk powder, Cheddar cheese and butter  recorded the most significant price decreases  - about 40% compared to the beginning of this year – a level that has not been reached since August 2012. John Lancaster, analyst with INTL FC Stone states that currently there exists a supply surplus worldwide and the only certainty nowadays is that prices of dairy products will remain volatile. Great Britains’s milk production was 8% higher in the second quarter in 2014, compared to the same period in 2013, and that of Ireland 10% higher. Farmers in Germany, the country with the highest production of milk and dairy products in the EU, supplied the market with 3% more milk in the first 6 months and a half in 2014, compared to the same time period in 2013, and the milk  production in the USA in the month of June 2014 was 2% higher than in the same month of the previous year, the American farmers taking advantage of the good price obtained.   The higher production of milk and dairy products was not, however,theonly causeof theincreaseof availablequantities ofmilkanddairyproductson theworld market, the embargo imposed by the Russian Federation to thefood products from theCommunitybeing, aswell, a factor notto be neglectedat all in thisrespect. Accordingto the most recent report made public by the EuropeanCommission (EC), 10% ofthe milk and dairy products quantity exported by the EU countriesto third partiesin 2013 (equivalent to 2.2 million tonsofmilk) wasbound for theRussian market.   Various types of cheese were the main category of dairy products imported by Russia from the EU. Almost 257,000 tons of cheese produced in the EU entered the Russian market last year, which means 33% of the total quantity exported to the third countries and 2.5%  of the total cheese production of the Union. In 2013, were also exported to Russia, among others, 37,000 tons of butter (32% of the EU exports), 25,000 tons of whey powder (5% of the EU exports) and other 21,000 tons of milk powder (5% of the EU exports).   Declining forecastsfor the milk price At the beginning of the month of August, the New Zealand giant Fonterra decreased the milk price forecast for the season 2014-15, blaming the higher stocks in China, the poor demand on the emerging markets and the large supplies existing in the world. As well, the British milk manufacturer First Milk decreased the price of farm gate milk by 0.5 pounds/100 liters, starting with the contracts running as of September 1. The President of the company, Sir Jim Paice stated that the milk price decrease on the world market was the cause of the fourth price decrease for the milk marketed by his company, in the last four months. "Unfortunately,  at this time, there is no sign of change in the market trend", he said.   THE TAPE: The magnitudeandfastness of the dairy products price decline worldwide, in the first part ofthisyear, reflectedby the prices atthe tenderscarried outon the GDT platform surprised mostof the commentators in thisfield. In the period February 18 – July 8, 2014, the price of whole milk powder (WMP) decreasedby 38%, and the weighted index of the prices of dairy products traded worldwide (non WMP products included), decreasedby 34%. And thiscomes aftera period duringwhich record prices and quantitieshavebeen recordedonthe demandside as well, demandcoming particularlyfrom China, a situationwhichactually justifiesthe high prices in the past. Takinginto considerationwhathappened, maybe it is trite to say that the outcome representsthe motionbetween the demand and the supply.   Thus, the decline of dairy products price on the international market in the first part of this year and which will continue to persist, according to the analysts’ assessments, in the first autumn month too, is nothing but the outcome of the  generous supply of such goods for export, which came mainly from the New Zealand, combined with a decline in demand from China, declining demand  due to a high domestic production which managed to cover a larger segment of the domestic consumption in the spring and summer months.   Stakeon stocks Starting from this situation, a number of remarks may be made:   The first is lower prices will limit the supply and will encourage the buyers to make stocks of dairy products purchased at such lower prices. The dairy products industries in the USA and Europe that have large quantities of dairy products have the possibility to export more, but the volatility of prices worldwide and particularly the price reduction act against them: the large production and small profit margins in this volatile market in terms of prices, can anytime turn profits in loss, for the European and North-American companies. It is however much harder to assess how the prices volatility will influence the long term profit of the New Zealand dairy products industry. A second remark that can be done is that this important reduction of the dairy products market value will tend to trigger a higher demand of such goods from the buyers, demand of which expansion will continue until the moment when the supply surplus recorded in the international trade will decrease significantly. Once reached this point, prices will return to their true level, supported by the reduction of milk production during the winter months in the northern hemisphere. "In this period of the year we could expect a return on the market of the buyers from the Middle East, after the end of the Ramadan period, to restore their stocks”, expresses his hope John Lancaster. A third remark made by those who monitor and analyze the dairy products market is that not all the dairy products are sold through the platform held by Fonterra and for the prices recorded at tenders carried out through this platform. Only a small part of the current season production was traded until this moment, and information regarding the price, supplied by the tenders carried out through GDT does not represent, according to these commentators in this field, anything else but  a buffer of some developments which could have materialize in a higher volatility of the prices. Fourthly, theh analysts of the dairy products international market remind that nothing has changed – the world still needs 50% more food and 100% more proteins by year 2050. Agriculture is responsive to demand and price increases, but in this case, the demand surplus for milk will be ensured mostly by the current rich supply of the farms and industrial processors (particularly from Europe, USA and New Zealand); supply which, at its turn, will exercise a pressure on the food sources for cows and an increase of feed prices. Finally, fifthly, in China there is a strong growth in the short term – its GDP, according to the official statistics, recorded an expansion of 7.5% year in the 2nd quarter of 2014 (higher than market expectations, which were anticipating developments of only 7.4%). At the same time, taking into consideration certain risks related to the slowdown  of economic growth pace, the Chinese government  took a number of steps to protect this economic growth rate. In conclusion, we can say that the current prices volatility is not beneficial for the industry, but we expect that a decrease of this volatility will occur in the next months. ”Stabilization” will reach some more reduced levels of the dairy products prices, compared to the beginning of the year, prices which will however be higher than the current ones, which will ensure reasonable profitability. In the longer term, it is important to note that the milk price may be very volatile, but particularly in the event of a lower demand.   Clal-Italia: Milk price isgrowing on theRomanian market With regards toRomania, milk price is growing, as indicate the data of the Italian company for consultancy in the field of dairy products industry, Clal. Thus, the milk price at the farm gate, in Romania increased in June, compared to the month of  January by 2.9% expressed in euro, an increase owed, however, to leu strengthening against the European currency. In lei, milk price remained unchanged, at a level of 1.24 lei/liter. Compared to the average of year 2013, the average price of farm gate milk, in Romania, for the first six months of 2014 was 2.51% higher. The price of farm gate milk in Romania reached in the month of June 2014 a level 3.9% higher than the average of 2013.   The Romanian farmerssellthe cheapestmilk in Europeifwe exceptthe Lithuanian farmers, who occupythe lastpositionin thisrespect. In March, the Romanian farmersmanagedtosellmilk at a higher pricethanthe farmers in PolandandHungary, when atthe farm gateforone liter ofmilkthe amount of 1.26 lei was offered.    According to DG AGRI data, the farmers in Cyprus get the best price in Europe for milk (2.52 lei, expressed in our national currency), being followed byMalta, Greece, Finland and Sweden, where one liter of milk from the manufacturers costs 2.27 lei, respectively 1.92 lei, 1.89 lei and  1.67 lei. Farmers of the main European agricultural forces, Germany and France, sold one liter of milk for a price of 1.51 lei, respectively 1.40 lei. Those on the last places have been beaten by our Bulgarian neighbors, who sold their merchandise against a price of 1.47 lei for a liter.