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Global milk supplies forecast to remain tight

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Christian Fernsby ▼ | April 5, 2019
milk
World   High input costs and low farmgate prices have squeezed margins

Rabobank expect milk supplies from the seven major milk producing countries to remain tight over the forecast period to 2020.

Particular pressure will be felt in the first half of 2019 as milk production looks to fall to levels not seen since 2016, ADB reports.

In the first quarter of 2019, milk supply growth has stalled year-on-year.

High input costs and low farmgate prices have squeezed margins, leading to reduced collections in Australia, the EU and the US.

Reduced herd numbers have also limited production potential.

While production in Argentina and New Zealand has been growing, recent droughts have affected production and could add pressure to supplies over the coming months.

In the EU, most of the major producing countries have had a reduction in herd size.

This has had an impact on production and will continue to do so until such time as the herd size increases again.

The increase seen in some countries is not enough to make up the reduction from others.

While herds have also declined in the US by 79,000 head, improved yields meant production was up 0.2% year-on-year in February following the 0.9% increase in January.

In the short term, the tight supplies are expected to support global prices but Rabobank feel there are still risks mainly focussed on the affordability of dairy due to weaker economic growth and rising retail prices.


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