Global Dairy Markets: Analysis and Projections

Price Dynamics and Profitability

Nate Donnay of StoneX highlighted a sharp rise in dairy prices across Europe and the US earlier this year, acknowledging a subsequent decline. Despite this, prices remain robust relative to feed costs, indicating favorable profitability for dairy exporters. In Oceania, New Zealand farmers also benefit from advantageous exchange rates, though domestic costs could impact margins.

US Dairy Market Outlook

Although US dairy farmer margins have peaked, they remain positive amid fluctuating dairy and feed prices. A forecast from the ERS suggests adjustments in milk prices, impacting forecasts for Class III and Class IV milk. However, herd expansion and production efficiency could bolster US milk supply.

Challenges in California

The H5N1 bird flu has significantly hindered milk deliveries in California, potentially reducing US milk supply by 2%. However, neighboring states have experienced minimal production declines due to the disease.

New Zealand's Market Position

New Zealand continues to enjoy a favorable dynamic, with rising milk solids production. However, dry weather poses potential risks to future outputs. Farmers remain in a strong financial position despite elevated costs.

European Market Projections

StoneX experts warn of potential impacts from foot and mouth disease and blue tongue outbreaks in Europe, with Germany currently monitoring isolated cases. If managed effectively, milk production should remain stable, aided by unchanged feed costs and strong UK production patterns.

China's Market Influence

In China, dairy consumption remains flat, impacting import demands. However, decreased domestic production might slightly elevate import needs, though weak consumer confidence and declining demand could temper any significant increase.