Rabobank: slow supply growth, rising prices on the horizon for dairy market
Source: The DairyNews
As 2023 concludes, Rabobank's experts predict a shift in the global dairy market dynamics, signaling a move towards a new phase in its cycle. The past year witnessed subdued milk supply growth and lackluster demand, resulting in soft dairy commodity pricing. However, the tide is turning, with Rabobank anticipating sluggish milk supply growth but improved dairy prices in 2024.
Despite the optimism, the market remains delicately balanced, with uncertainties surrounding the underlying demand for the coming year. The soft global dairy commodity pricing of 2023 was attributed to weaker fundamentals, as global milk supply growth failed to impress after three consecutive quarters of expansion. Lower milk prices, elevated costs, and weather disruptions applied the brakes, setting the stage for a nuanced outlook.
Rabobank's milk supply outlook for 2024 has been tempered, with sluggish growth anticipated across most export regions. Michael Harvey, an analyst at Rabobank, notes, “The milk supply export engine never fully fired on all cylinders in 2023 and declined year-on-year in the third quarter by 0.2%. Overall, milk supply is forecast to grow by a modest 0.3% for the entire year.”
While farmgate milk prices across export regions experienced a decline in 2023, the 2024 feed cost outlook presents a more favorable scenario, leading to recent increases in some regional milk prices and boosting farmgate margins.
Harvey emphasizes a cautious approach to the recovery in dairy commodity prices, stating, “We expect a slow recovery in dairy commodity prices back to long-term averages. However, current fundamentals provide the perfect ingredients for price volatility and a possible market whiplash.”
The report highlights key factors to monitor in 2024, including the influence of geopolitical instability, volatile energy markets, and weak macroeconomic conditions on the global dairy markets. Additionally, demand will be a critical factor, with high dairy inflation, broader cost-of-living concerns, and weak consumer confidence on the horizon. China's import appetite for dairy commodities is expected to play a pivotal role in influencing Oceania commodity prices, presenting an opportunity for importers outside of China to build stocks in 2024.
As the new year unfolds, Rabobank suggests keeping an eye on factors such as a mildly softer grain and oilseed price outlook, as well as El Niño and weather-related risks, to navigate the evolving landscape of the global dairy market.
Rabobank's milk supply outlook for 2024 has been tempered, with sluggish growth anticipated across most export regions. Michael Harvey, an analyst at Rabobank, notes, “The milk supply export engine never fully fired on all cylinders in 2023 and declined year-on-year in the third quarter by 0.2%. Overall, milk supply is forecast to grow by a modest 0.3% for the entire year.”
While farmgate milk prices across export regions experienced a decline in 2023, the 2024 feed cost outlook presents a more favorable scenario, leading to recent increases in some regional milk prices and boosting farmgate margins.
Harvey emphasizes a cautious approach to the recovery in dairy commodity prices, stating, “We expect a slow recovery in dairy commodity prices back to long-term averages. However, current fundamentals provide the perfect ingredients for price volatility and a possible market whiplash.”
The report highlights key factors to monitor in 2024, including the influence of geopolitical instability, volatile energy markets, and weak macroeconomic conditions on the global dairy markets. Additionally, demand will be a critical factor, with high dairy inflation, broader cost-of-living concerns, and weak consumer confidence on the horizon. China's import appetite for dairy commodities is expected to play a pivotal role in influencing Oceania commodity prices, presenting an opportunity for importers outside of China to build stocks in 2024.
As the new year unfolds, Rabobank suggests keeping an eye on factors such as a mildly softer grain and oilseed price outlook, as well as El Niño and weather-related risks, to navigate the evolving landscape of the global dairy market.
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