Archive: Can increased exports to Algeria help support commodity prices?

Published 25 November 14

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Algeria is one of the world’s key destinations for exports of milk powders. Demand from Algeria has accounted for around 17% of all global trade in milk powder over the past five years. Total volumes for the first eight months of 2014 have already exceeded the total volume for the whole of 2013.

This suggests that the Algerian government dairy buying agency, ONIL, has taken advantage of falling global commodity prices to build stock levels. As a result, ONIL has stated that it has sufficient volumes to meet domestic needs until July 2015.

If this surge in purchasing by Algeria is simply a change in the timing of purchasing rather than a sustained increase in demand limits, any support the surge in buying may offer to declining commodity prices will be limited. It is significant to note that one of the world’s biggest buyers of milk powder has storage capacity to satisfy domestic demand for almost 12 months ahead, providing Algeria with the ability to take advantage of pricing cycles. When global powder prices appear to be on the verge of bottoming out we may see another spike in demand from Algeria as it seeks to fill stores with powders at the lowest possible price. This could provide a floor to milk powder prices.