Rabobank Raises 2024-25 Milk Price Forecast to $9.70/kg MS
Source: DairyNews.today
Rabobank has revised its 2024-25 milk price forecast to $9.70 per kilogram of milk solids (kg MS), up from $8.60/kg MS projected in its previous quarterly report.
While a $10/kg MS milk price is conceivable, farmers should remain cautious due to lingering market uncertainties, according to RaboResearch senior agricultural analyst Emma Higgins.
“A $10/kg MS price could materialize if strong New Zealand milk flows are absorbed by global markets, Chinese demand for New Zealand dairy products continues to recover, and other key dairy regions encounter production challenges, particularly late in the season,” Higgins said.
“However, significant risks remain for 2025, including commodity price volatility.”
Factoring in these elements, Rabobank arrived at a forecast of $9.70/kg MS.
Global Milk Supply Outlook
Rabobank’s fourth-quarter report, titled A Period of Prosperity, highlights a pivotal moment for milk supply growth across the top seven dairy-exporting regions—New Zealand, Australia, Argentina, Uruguay, Brazil, the European Union, and the United States.
Year-on-year production growth for the second half of 2024 is projected at 0.5%, reversing a 0.5% decline recorded during the same period last year.
Higgins noted that global milk prices are rising, with feed prices stabilizing, leading to improved margins for dairy farmers worldwide.
“This environment of rising milk prices and accessible feed will likely result in increased milk production for 2025. Supply growth across the top exporters is anticipated in all regions for the first time since 2020,” she said.
However, the report emphasized that supply increases are unlikely to overwhelm global markets, with Rabobank forecasting a modest 0.8% growth in milk supply for 2025.
Challenges in the Chinese Dairy Market
Contrasting the global outlook, China’s domestic dairy market faces headwinds, with milk prices hovering near decade lows. These conditions have led to herd reductions and farm closures, particularly among smaller operators.
“Chinese dairy demand remains sluggish, but there is cautious optimism that the market has passed its lowest point, which is gradually lifting global markets,” Higgins said.
Demand-Side Dynamics
Global dairy demand is mixed, with consumer spending under pressure in several economies, impacting dairy purchases. Nonetheless, Rabobank sees dairy fundamentals as mostly balanced heading into 2025.
“Current dairy commodity prices support improved farm margins while avoiding significant cost pressures for food and beverage manufacturers,” Higgins explained.
Risks Ahead
Rabobank cautioned that pricing volatility remains a concern, with the potential for markets to overshoot. Other risks include rising US trade protectionism post-elections, ongoing disease management challenges such as avian influenza in the US and Bluetongue in Europe, and broader geopolitical and economic uncertainties.
“We remain cautiously optimistic but advise farmers to prepare for potential pricing whiplash as history has shown markets can quickly shift,” Higgins said.
“A $10/kg MS price could materialize if strong New Zealand milk flows are absorbed by global markets, Chinese demand for New Zealand dairy products continues to recover, and other key dairy regions encounter production challenges, particularly late in the season,” Higgins said.
“However, significant risks remain for 2025, including commodity price volatility.”
Factoring in these elements, Rabobank arrived at a forecast of $9.70/kg MS.
Global Milk Supply Outlook
Rabobank’s fourth-quarter report, titled A Period of Prosperity, highlights a pivotal moment for milk supply growth across the top seven dairy-exporting regions—New Zealand, Australia, Argentina, Uruguay, Brazil, the European Union, and the United States.
Year-on-year production growth for the second half of 2024 is projected at 0.5%, reversing a 0.5% decline recorded during the same period last year.
Higgins noted that global milk prices are rising, with feed prices stabilizing, leading to improved margins for dairy farmers worldwide.
“This environment of rising milk prices and accessible feed will likely result in increased milk production for 2025. Supply growth across the top exporters is anticipated in all regions for the first time since 2020,” she said.
However, the report emphasized that supply increases are unlikely to overwhelm global markets, with Rabobank forecasting a modest 0.8% growth in milk supply for 2025.
Challenges in the Chinese Dairy Market
Contrasting the global outlook, China’s domestic dairy market faces headwinds, with milk prices hovering near decade lows. These conditions have led to herd reductions and farm closures, particularly among smaller operators.
“Chinese dairy demand remains sluggish, but there is cautious optimism that the market has passed its lowest point, which is gradually lifting global markets,” Higgins said.
Demand-Side Dynamics
Global dairy demand is mixed, with consumer spending under pressure in several economies, impacting dairy purchases. Nonetheless, Rabobank sees dairy fundamentals as mostly balanced heading into 2025.
“Current dairy commodity prices support improved farm margins while avoiding significant cost pressures for food and beverage manufacturers,” Higgins explained.
Risks Ahead
Rabobank cautioned that pricing volatility remains a concern, with the potential for markets to overshoot. Other risks include rising US trade protectionism post-elections, ongoing disease management challenges such as avian influenza in the US and Bluetongue in Europe, and broader geopolitical and economic uncertainties.
“We remain cautiously optimistic but advise farmers to prepare for potential pricing whiplash as history has shown markets can quickly shift,” Higgins said.
