Milk Prices Show Limited Recovery Amidst Supply-Demand Balancing Act
Source: The DairyNews
As 2024 unfolds, the dairy market finds itself in the grip of the winter doldrums, with little change in sentiment.
Dairy farmers, eager for a rebound in milk prices, are yet to witness a substantial improvement. The prevailing themes echo through the weeks, as a weakened global milk supply contends with sluggish overall demand, maintaining dairy product prices in a steady yet rangebound state at the start of the year.
Globally, the industry walks a tightrope of constrained 'new' milk, marked by soft global dairy commodity pricing in 2023 due to underlying weaknesses. Limited milk supply growth globally, sporadically interrupted by three consecutive quarters of growth last year, halted as lower milk prices, heightened costs, and weather disruptions took their toll. The global market anticipated the rebalancing of the Chinese market, only to face a second year of significant shortfalls in Chinese dairy imports.
Transitioning into the next phase of the price cycle, signs suggest that the bottom has been reached for most dairy commodity prices. CME futures market forward curves indicate generally higher prices across both the Class III and Class IV complex for the remainder of the year.
At the individual commodity level, trends vary. Cheese market struggles, with spot block and barrel Cheddar prices at unsustainable lows, indicating milk checks below production costs. Adequate cheese supplies may prevent significant bullish gains, but the January lows are expected to be short-lived.
Conversely, robust butter demand and tighter supply have kept prices elevated above the long-term average. After hitting a record high in October 2023, spot butter prices exhibit persistent strength into 2024, driven by tight December stocks and an early Easter. Concerns linger about potential future price spikes, setting budgets above the historical average range.
Nonfat dry milk and dry whey markets exhibit remarkable stability, with balanced supply and demand curbing upside and downside risks, keeping prices within a narrow range.
The next phase of the demand story becomes a focal point, with inflation, consumer confidence, and overall demand as critical watch factors. Rabobank anticipates a slow recovery in Class III and Class IV milk prices, but the prevailing uncertainties make 2024 a potential ground for price volatility.
Globally, the industry walks a tightrope of constrained 'new' milk, marked by soft global dairy commodity pricing in 2023 due to underlying weaknesses. Limited milk supply growth globally, sporadically interrupted by three consecutive quarters of growth last year, halted as lower milk prices, heightened costs, and weather disruptions took their toll. The global market anticipated the rebalancing of the Chinese market, only to face a second year of significant shortfalls in Chinese dairy imports.
Transitioning into the next phase of the price cycle, signs suggest that the bottom has been reached for most dairy commodity prices. CME futures market forward curves indicate generally higher prices across both the Class III and Class IV complex for the remainder of the year.
At the individual commodity level, trends vary. Cheese market struggles, with spot block and barrel Cheddar prices at unsustainable lows, indicating milk checks below production costs. Adequate cheese supplies may prevent significant bullish gains, but the January lows are expected to be short-lived.
Conversely, robust butter demand and tighter supply have kept prices elevated above the long-term average. After hitting a record high in October 2023, spot butter prices exhibit persistent strength into 2024, driven by tight December stocks and an early Easter. Concerns linger about potential future price spikes, setting budgets above the historical average range.
Nonfat dry milk and dry whey markets exhibit remarkable stability, with balanced supply and demand curbing upside and downside risks, keeping prices within a narrow range.
The next phase of the demand story becomes a focal point, with inflation, consumer confidence, and overall demand as critical watch factors. Rabobank anticipates a slow recovery in Class III and Class IV milk prices, but the prevailing uncertainties make 2024 a potential ground for price volatility.
