Dairy Market Outlook 2024: Slow and Steady Gains Anticipated Amid Global Dynamics
Source: The DairyNews
Anticipated dairy commodity prices are poised for a rebound in 2024, although the specter of global politics looms as a potential game-changer, writes Emma Higgins, Senior Agricultural Analyst at Rabobank for publication Dairy Farmer.
Across key dairy-producing regions worldwide, a gradual uptick in dairy commodity prices is forecasted throughout 2024, marking a recovery from the downturn observed towards the close of 2023.
In regions such as the European Union, the United States, and Oceania, prices for skim milk powder are expected to inch upwards steadily, propelled by incremental demand improvements. In the U.S., this rise is further bolstered by a reduction in supply, coinciding with stocks hitting an eight-year low.
A similar trajectory is projected for whole milk powder, with the modest gains witnessed at the close of 2023 expected to persist in the ensuing quarters.
This positive trend in global dairy commodity prices is likely to be buttressed by weakened global milk supply. Key exporting areas are anticipated to grapple with production challenges in the initial half of the year, contributing to an overall decrease in milk output for the entire year.
Despite earlier projections, New Zealand's milk production has displayed resilience, with only a marginal decrease compared to the previous season. However, collections of milk solids have surged, driven notably by a robust performance in the South Island.
Looking ahead, a decrease of 0.7% in milk production is envisaged for the full 2023/24 year. The forthcoming 2024/25 season is anticipated to commence on a more favorable note, benefiting from improved weather conditions and comparables.
Unlike previous instances of supply constriction leading to bullish price responses, the current supply and demand landscape presents a nuanced picture. Although global buyers maintain sufficient inventories, recent macroeconomic concerns have tempered price optimism despite reduced milk supply.
Encouragingly, there are signs of an upward trajectory in dairy demand, with some countries moving past recessionary fears. Notwithstanding subdued global economic growth, a modest uptick is anticipated.
Moreover, positive indicators from China, such as robust retail and food service sales during the Lunar New Year, suggest a potential improvement in imports for 2024.
With these factors in mind, a cautious optimism surrounds the dairy market, with expectations of incremental price gains in the coming year. Accordingly, a slight upward revision has been made to the New Zealand milk price forecast for the 2023/24 season.
However, amidst these projections, the dairy sector remains watchful of various global events, particularly impending elections in key dairy regions. Potential leadership changes could herald shifts in policy approaches, impacting trade agreements, sustainability initiatives, and nutrition priorities, thereby influencing dairy prices.
Additionally, developments in nitrogen derogation limits in countries like the Netherlands, Ireland, and Denmark pose challenges for farmers, potentially altering herd sizes and increasing costs for manure disposal.
As the dairy market navigates through these dynamics, stakeholders remain vigilant, prepared to adapt to evolving global conditions.
In regions such as the European Union, the United States, and Oceania, prices for skim milk powder are expected to inch upwards steadily, propelled by incremental demand improvements. In the U.S., this rise is further bolstered by a reduction in supply, coinciding with stocks hitting an eight-year low.
A similar trajectory is projected for whole milk powder, with the modest gains witnessed at the close of 2023 expected to persist in the ensuing quarters.
This positive trend in global dairy commodity prices is likely to be buttressed by weakened global milk supply. Key exporting areas are anticipated to grapple with production challenges in the initial half of the year, contributing to an overall decrease in milk output for the entire year.
Despite earlier projections, New Zealand's milk production has displayed resilience, with only a marginal decrease compared to the previous season. However, collections of milk solids have surged, driven notably by a robust performance in the South Island.
Looking ahead, a decrease of 0.7% in milk production is envisaged for the full 2023/24 year. The forthcoming 2024/25 season is anticipated to commence on a more favorable note, benefiting from improved weather conditions and comparables.
Unlike previous instances of supply constriction leading to bullish price responses, the current supply and demand landscape presents a nuanced picture. Although global buyers maintain sufficient inventories, recent macroeconomic concerns have tempered price optimism despite reduced milk supply.
Encouragingly, there are signs of an upward trajectory in dairy demand, with some countries moving past recessionary fears. Notwithstanding subdued global economic growth, a modest uptick is anticipated.
Moreover, positive indicators from China, such as robust retail and food service sales during the Lunar New Year, suggest a potential improvement in imports for 2024.
With these factors in mind, a cautious optimism surrounds the dairy market, with expectations of incremental price gains in the coming year. Accordingly, a slight upward revision has been made to the New Zealand milk price forecast for the 2023/24 season.
However, amidst these projections, the dairy sector remains watchful of various global events, particularly impending elections in key dairy regions. Potential leadership changes could herald shifts in policy approaches, impacting trade agreements, sustainability initiatives, and nutrition priorities, thereby influencing dairy prices.
Additionally, developments in nitrogen derogation limits in countries like the Netherlands, Ireland, and Denmark pose challenges for farmers, potentially altering herd sizes and increasing costs for manure disposal.
As the dairy market navigates through these dynamics, stakeholders remain vigilant, prepared to adapt to evolving global conditions.
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