Rabobank Forecasts Global Dairy Prices Will Rise In 2024
Limited milk supply growth and lackluster demand led to soft dairy commodity pricing in 2023. However, the global dairy market appears to be transitioning to the next phase in its cycle, with prices expected to move higher through 2024. Still, the market remains finely balanced, and uncertainty remains surrounding underlying demand for 2024, says Rabobank in its Global Dairy Quarterly Q4 2023 report, “Shifting to the Next Phase of the Cycle.”
Global Dairy Prices: Transitioning To The Next Phase In 2024
As 2023 draws to a close, the global dairy market continues to walk a tightrope of limited “new” milk and sluggish demand, the report says, noting the year saw soft global dairy commodity pricing due to weaker underlying fundamentals. Global milk supply growth was underwhelming, with three consecutive quarters of growth. Then lower milk prices, elevated costs and weather disruption put the brakes back on.
Rabobank’s Milk Supply Outlook For 2024: A Modest Growth Forecast
Rabobank’s milk supply outlook for 2024 has weakened, with sluggish growth expected across most export regions.
“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%,” says
Michael Harvey, senior analyst-dairy at Rabobank. “Year-over-year milk production from the ‘Big 7’ exporting regions (Argentina, Brazil, Uruguay, Australia, New Zealand, the European Union [EU] and the United States) is forecast to decrease through Q1 2024 before turning positive. Overall, milk supply is forecast to grow by a modest 0.3% for the entire year.”
US Milk Production Trends: Impact Of Cost Cuts And Declining Yields
U.S. milk production marked its fourth consecutive year-on-year decline in October (down 0.5%), negatively impacted by fewer cows and lower yield, the report notes. The largest year-on-year decline, year-to-date, occurred in July, when production fell 0.9%. The weakness was not unexpected. Low milk prices created negative margins earlier this year, forcing farmers to cut costs and shed unprofitable cows, Rabobank says. Looking ahead, production growth is expected to be flat in the coming months before moving higher in mid- to late-2024. Rabobank forecasts 2023 milk production to be up 0.2% year-over-year in 2023, with 1% growth expected in 2024.
Farmgate Milk Prices: End-of-Year Analysis And 2024 Projections
In local currencies, farmgate milk prices across the export regions will close out 2023 anywhere between 20% to 40% lower versus the start of the year, the report says. However, with the 2024 feed cost outlook looking more favorable, some regional milk prices recently have increased, boosting farmgate margins.
Global Dairy Prices And Market Volatility: Factors To Watch In 2024
“We expect a slow recovery in dairy commodity prices back to long-term averages,” Harvey says. “However, current fundamentals provide the perfect ingredients for price volatility and a possible market whiplash. Geopolitical instability risks, volatile energy markets and weak macroeconomic conditions will be something to watch in 2024 for the global dairy markets.”
Demand Trends In 2024: Consumer Confidence And Inflation Impact
Demand also will be a key factor to watch in 2024, with high dairy inflation, broader cost-of-living issues and weak consumer confidence remaining on the horizon, the report says. Peak food and dairy inflation have passed, but market uncertainty remains, and rising unemployment will further impact purchasing power in 2024. Emerging markets and low-income households are under the most pressure.
China’s Dairy Import Appetite And Its Influence On Global Dairy Prices
In China, consumer prices are falling and foodservice recovery continues, but overall consumption growth is sluggish. China’s import appetite for dairy commodities still is expected to drive any Oceania commodity price rally in 2024, the report notes.
Navigating The Complexities Of Global Dairy Prices In 2024
“Rabobank expects China’s import volume to flatline in 2024, which would be a positive result, given the previous two years of withdrawal from the global markets,” Harvey says. “This is an opportunity for importers outside of China to build stocks in 2024.” The report notes other factors to watch in 2024 include a mildly softer grain and oilseed price outlook, El Niño and weather-related risks, mixed livestock markets in export regions and the impact of the Israel-Hamas war on global markets.
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Source: Cheese Market News