Rabobank: Global Dairy Market Faces Challenges as Milk Price Recovery Slows
Source: The DairyNews
Rabobank's latest global dairy quarterly report, released on Tuesday, indicates a slight cooling in the recovery of global milk prices that had begun in late 2023 and continued into early 2024. As we moved into the second quarter of 2024, the bank noted that the market faces new challenges that could hinder price stabilization.
Initially, Rabobank had anticipated slow but steady increases in milk prices throughout 2024. However, recent developments have tempered these expectations. Adverse weather conditions, including excessive rainfall in Europe, have significantly impacted milk production. Moreover, a combination of weaker global demand and an increase in domestic production in China is curtailing Chinese imports, adding further pressure to global prices.
The bank’s analysis reveals a shift in market dynamics, with dairy buyers becoming more cautious. After capitalizing on lower prices in the previous quarters to rebuild inventories, buyers are now slowing down their purchasing activities in response to an expected seasonal peak in milk production in the northern hemisphere.
The report also highlights varied signals regarding demand recovery, with persistent high inflation affecting purchasing power in many countries. In Europe, particularly, the late onset of spring and surplus rainfall have disrupted the seasonal milk production cycle, leading to delayed pasture availability and subsequently impacting milk volumes.
Specifically, the report states that milk deliveries in the EU and UK for January and February fell by nearly 0.5% year-on-year, factoring in leap year calculations. Notably, Ireland saw a significant drop in milk volumes, decreasing by 16.3% or 98,000 metric tonnes during this period. Other regions like the Netherlands and the UK also experienced declines, though less severe.
Conversely, France showed a marginal year-on-year increase in milk volumes for the first time since December 2022, and Spain and Poland recorded growth in their milk production.
Despite these mixed outcomes, Rabobank maintains that the overall market recovery will likely be slower than previously projected. The earlier price increases were largely driven by low prices and restocking efforts rather than a sustained rise in consumer demand. Additionally, China's reduced reliance on imports is expected to further challenge the global dairy market in the upcoming months, according to the bank's forecast.
The bank’s analysis reveals a shift in market dynamics, with dairy buyers becoming more cautious. After capitalizing on lower prices in the previous quarters to rebuild inventories, buyers are now slowing down their purchasing activities in response to an expected seasonal peak in milk production in the northern hemisphere.
The report also highlights varied signals regarding demand recovery, with persistent high inflation affecting purchasing power in many countries. In Europe, particularly, the late onset of spring and surplus rainfall have disrupted the seasonal milk production cycle, leading to delayed pasture availability and subsequently impacting milk volumes.
Specifically, the report states that milk deliveries in the EU and UK for January and February fell by nearly 0.5% year-on-year, factoring in leap year calculations. Notably, Ireland saw a significant drop in milk volumes, decreasing by 16.3% or 98,000 metric tonnes during this period. Other regions like the Netherlands and the UK also experienced declines, though less severe.
Conversely, France showed a marginal year-on-year increase in milk volumes for the first time since December 2022, and Spain and Poland recorded growth in their milk production.
Despite these mixed outcomes, Rabobank maintains that the overall market recovery will likely be slower than previously projected. The earlier price increases were largely driven by low prices and restocking efforts rather than a sustained rise in consumer demand. Additionally, China's reduced reliance on imports is expected to further challenge the global dairy market in the upcoming months, according to the bank's forecast.
