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Global dairy market prices have likely peaked

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Staff Writer | October 13, 2017
Global dairy market prices have likely peaked, according to the latest Rabobank quarterly report, as key exporting regions show signs of increasing production.
Global dairy market
Dairy   EU production is in slow recovery
What is less certain is whether this growth will overwhelm the market and cause prices to start dropping, AHDB reported.

EU production is in slow recovery and overall increasing year on year, although performance across individual member states is mixed.

U.S. milk production has been boosted by improved yields from favourable weather. Despite difficult conditions in parts of Australia hampering production over the last 18 months, a modest recovery is expected this season, though this is not yet certain.

In South America, both Argentina and Brazil are seeing higher production. With demand growth in these countries remaining muted, more will be available for exports.

Wet weather delayed calving in New Zealand (NZ) and hampered August production, and the full impact of this is yet to be seen.

Forecasts for full season growth are varied, ranging from 1.5% to 3.5%, all heavily dependent on the impact of the wet weather on grass growth.

With NZ a major supplier to global markets, their spring production will play an important role in availability of global supplies in the next few months.

In contrast, Chinese production forecasts have been revised downwards. A hot summer impacted on production volumes, and farmgate prices for large farms have not seen the same recovery as in other countries.

This has led to a forecast of low milk production growth for the next season, which combined with increasing demand should lead to higher Chinese imports of dairy products.

Overall, this demand from China should help balance out the market. If it grows as expected it may prevent the increased global production from turning into oversupply, allowing a more gradual comedown from current prices.