Brussels, May 13 - European dairy markets may have come to the end of their blistering price rise and should begin to stabilise, the European Commission said on Tuesday.
"For dairy products, the peak is now over, and farmers have reacted. Production is going to go up and you can see the impact on market prices," a senior Commission official told reporters.
"In the medium term, it is likely that prices will stabilise at levels much lower than the peak but higher than the very low prices (of the late 1990s)," he said, speaking on condition of anonymity. "They will be higher because production costs have increased due to energy prices."
Since October 2007, dairy prices had fallen by around 35 percent for butter, by 40 percent for skimmed milk powder and by around 10 percent for cheddar cheese, he said.
"For most of these products, probably the peak has already been reached," he said, adding that the global price rises that had hit EU markets were a result of supply factors like strong world demand and drought in major livestock producer Australia.
"The EU could not meet the demand because of our dairy quotas, there are certain ceilings," he said. "The price is high due to structural reasons and also cyclical reasons linked to the question of limiting Brazilian imports for health reasons."
Cereals prices were a different matter, he said, although most grain markets -- except for maize -- also appeared to be tempering their recent surge. Prices of benchmark soft red winter wheat had been falling on both international and European markest since late February or early March, he said.
"But for maize, the situation is somewhat different. There was no shock on supply but on demand, and that is continuing. Imports from developing countries are continuing and biofuels demand in the U.S. is also continuing," the official said.
"Demand for animal feed is still high, particularly for emerging countries. Biofuels, for maize, will also contribute to keeping prices higher than they have been in the past. But biofuels in Europe have had practically no impact on prices."