Global dairy markets ‘teetering on the edge’- Rabobank

by | Jan 2, 2022 | News

Global dairy markets are “teetering” at low milk production levels not seen since 2014, according to Rabobank’s Q4 Global Dairy Quarterly report.

The agribusiness banking specialist said weather-related issues have reduced peak milk production in New Zealand and Australia, while squeezed profit margins for producers has reduced supply growth in the US and Europe.

This has caused a year-on-year fall in global milk production deficit that cannot be offset by milk production gains seen in South America, the report states.

Co-author of the report and Rabobank senior dairy analyst Michael Harvey said combined quarter four milk production in the big seven dairy exporting regions – New Zealand, Brazil, Argentina, Uruguay, EU, US and Australia – is expected to fall by 0.3 per cent compared with quarter four last year.

This will be the first quarterly year-on-year decrease since 2019.

The report said farmgate milk prices have followed commodity prices higher worldwide but rising costs for inputs, labour shortages, unfavourable weather and questionable feed quality will limit the production response by producers.

Global dairy exports have slowed in response to logistic disruptions, rising transportation costs, and elevated commodity prices.

“Global dairy exports based on product volume ran seven per cent ahead of the prior year during the first half of 2021, but slowed to one per cent in July and August,” the report said.

Harvey said reduced demand from China is expected and is needed to cool global prices in the face of limited supply-side increases.

Despite rising inflationary pressures, consumers have yet to face the “sticker shock” of higher prices for dairy products in most countries, the Rabobank report said, which is is supporting demand.

However, this would change in 2022, it said, as higher commodity prices from the second half of 2021 are passed on to consumers.

In addition, Harvey said, new variants of Covid-19, inflation, labour and logistic challenges, along with others weigh on the global economic recovery with the potential for global dairy markets to “teeter or totter”.

A sluggish spring milk production peak in New Zealand – the world’s largest dairy exporter – also contributed to a global supply slow down.

Harvey said New Zealand milk production has only recently started to benefit from more sunshine and warmth for much of the country.

“Unfortunately, the change to more favourable weather was too late for the peak milk month of October, when collections dropped by 3.3 per cent year on year,” he added.

“There have now been three consecutive months of milk supply slipping backward against 2020 since August 2021.

“Rabobank’s New Zealand milk production forecast for the entire 2021/22 season is -1 per cent year-on-year.

About the Author

Peter Wright

Related Posts

Scapegrace lands major deal with UK supermarket

Scapegrace lands major deal with UK supermarket

New Zealand’s Scapegrace Distilling Co has landed a major distribution deal with Waitrose, a leading UK supermarket chain known for its commitment to quality and premium products. The partnership will see Waitrose stock Scapegrace's acclaimed spirits, including...

The Warehouse trials frozen meals in its Manukau store

The Warehouse trials frozen meals in its Manukau store

The Warehouse has today launched a trial of three frozen ready meals at its Manukau store, in response to customers asking for more affordable options to feed their families. The Market Kitchen branded frozen meals will feed families of four and are great value at...