Will global dairy prices recover slower due to China’s reduced imports? Rabobank’s latest report explores the challenges and positive outlook for the dairy market.
According to Rabobank’s newly released sector research, the global dairy market is poised for a slower price recovery than previously anticipated. Despite this, the long-term outlook remains positive, offering a silver lining for the industry.
Several key factors are influencing this slower-than-expected price recovery:
- Initial Surge in Dairy Prices: The sharp rise in global dairy prices toward the end of 2023 and early 2024 was primarily driven by lower-priced restocking, a result of the industry’s efforts to replenish depleted stocks after a period of low prices. This restocking, however, was not accompanied by a corresponding increase in consumer demand, leading to an imbalance in the market.
- Headwinds in Q2 2024: The anticipated gradual price increases have been met with obstacles, including weaker global demand due to economic uncertainties and increased domestic milk production, particularly in China, which has led to a surplus in the market. These factors have combined to slow down the expected price recovery.
Rabobank’s report highlights modest global milk production growth, which is expected to help stabilize prices. This growth is driven by a combination of factors, including improved herd management practices and favorable weather conditions in key producing regions. However, the report also cautions that this growth may not be sufficient to offset the current surplus in the market.
Citing higher-than-anticipated milk production in China, Harvey notes that this has led to a surplus in the market, which, combined with subdued dairy consumption and an expected decline in dairy imports, has further complicated the market dynamics. This surplus is primarily due to increased investment in dairy farming and improved productivity, which has outpaced the growth in domestic consumption.
While China is a significant player in the global dairy market, its influence is just one piece of the puzzle. Australia, for instance, is demonstrating resilience and growth.
The Australian dairy market shows promising trends, with current production on the rise despite some weather challenges. The 2023/24 season forecast indicates continued growth, supported by adequate feed availability and solid domestic market conditions. This growth is driven by a combination of factors, including improved herd management practices, increased investment in dairy farming, and favorable weather conditions. These factors have helped to offset the impact of weather challenges and maintain a steady growth trajectory.
In addition to Chinese dairy production growth and reduced import demand, Rabobank identifies other influential factors in the global dairy market:
- Nitrogen Derogation Limits: Changes in Europe, particularly in the Netherlands, Ireland, and Denmark, may impact herd sizes and, subsequently, milk production.
- Pathogenic Avian Flu: Its spread in the US has potential implications for affecting dairy, particularly both older and younger cows, differently.
- Critical Global Elections: Political changes can alter market conditions, influencing policies and trade agreements that can profoundly impact the dairy industry.
- Strength of the US Dollar and Global Weather Systems: These continue to be notable watch factors, as currency fluctuations and climatic shifts can significantly influence dairy production, exports, and markets.
The journey towards a full recovery in dairy prices may be gradual and fraught with various challenges. Still, the overarching sentiment remains one of cautious optimism. The dairy market’s intrinsic resilience, coupled with strategic adjustments made by producers and ongoing monitoring of key influencing factors, suggests that the industry is well-poised to navigate these uncertainties.
For those within the dairy industry, the importance of monitoring these dynamic elements cannot be overstated. By staying informed and adaptable, producers can better position themselves to take advantage of the eventual upturn in the market, empowering them in their decision-making.
In conclusion, while the path to full recovery may be slow and fraught with obstacles, a sense of cautious optimism remains for the dairy market’s future, inspiring hope in stakeholders.
Key Takeaways:
The global dairy market’s price recovery is facing a slower trajectory than initially expected, based on Rabobank’s latest insights. Despite the delay, the overall outlook remains optimistic.
“The global dairy market may experience a slower price recovery than previously anticipated, particularly as China shows a reduced need for dairy imports.”
- The initial rise in global dairy prices was stimulated by restocking at lower prices, not a significant increase in consumer demand.
- Weak global demand and increased milk production in China are major headwinds in Q2 2024.
- Modest growth in milk production is expected in key exporting regions, supporting price stabilization.
- Australia shows resilience with forecasted growth in milk production for the upcoming season.
- Other factors influencing the market include regulatory changes in Europe, pathogenic avian flu, and macroeconomic variables.
