Rabobank Predicts Sluggish Recovery in Global Dairy Prices with a Forecast of $8.40 per kMS
Source: The DairyNews
Rabobank has set the opening milk price at $8.40 per kilogram of milk solids for the upcoming dairy season, cautioning that the recovery in global dairy prices is likely to be slower than previously expected.
This forecast is detailed in the bank’s Q2 Global Dairy Quarterly report, which also notes a current dip in demand but a decrease in milk production which is anticipated to support a gradual increase in prices for dairy producers globally.
Emma Higgins, Rabobank's Senior Agricultural Analyst, explained that diminished profitability over the past year has led to reduced dairy herds in significant regions such as the US and South America. Additionally, recent weather challenges have impacted milk output, with reduced rainfall in New Zealand and excessive rain in Europe affecting production levels.
Despite these production declines, Higgins emphasized that the dairy market recovery remains uneven. "While global milk supply growth is subdued, which is generally supportive of recovery, global demand remains inconsistent, and consumers are under financial pressure due to persistently high inflation and interest rates affecting spending and debt servicing," she stated.
Further complicating the recovery, milk output in China, a key market for New Zealand, has been revised upward for 2024 from an expected increase of 2% to 3.2%, reflecting a higher than anticipated production following extensive dairy expansions between 2019 and 2022. This increase in Chinese milk production poses a significant challenge to New Zealand’s dairy sector, especially given that over 30% of its dairy exports are directed towards the Chinese market.
"This uptick in Chinese production is a potential downward risk to the forecasted farmgate milk prices in New Zealand," Higgins added, highlighting the intricate dynamics influencing the global dairy market.
Emma Higgins, Rabobank's Senior Agricultural Analyst, explained that diminished profitability over the past year has led to reduced dairy herds in significant regions such as the US and South America. Additionally, recent weather challenges have impacted milk output, with reduced rainfall in New Zealand and excessive rain in Europe affecting production levels.
Despite these production declines, Higgins emphasized that the dairy market recovery remains uneven. "While global milk supply growth is subdued, which is generally supportive of recovery, global demand remains inconsistent, and consumers are under financial pressure due to persistently high inflation and interest rates affecting spending and debt servicing," she stated.
Further complicating the recovery, milk output in China, a key market for New Zealand, has been revised upward for 2024 from an expected increase of 2% to 3.2%, reflecting a higher than anticipated production following extensive dairy expansions between 2019 and 2022. This increase in Chinese milk production poses a significant challenge to New Zealand’s dairy sector, especially given that over 30% of its dairy exports are directed towards the Chinese market.
"This uptick in Chinese production is a potential downward risk to the forecasted farmgate milk prices in New Zealand," Higgins added, highlighting the intricate dynamics influencing the global dairy market.
