Rabobank anticipates an initial milk price of $8.40 per kilogram of milk solids for the next dairy season, cautioning that the global dairy market’s recovery will be slower than previously anticipated.
In its Q2 Global Dairy Quarterly report, Rabobank noted that although demand remained subdued, reduced milk production worldwide should lead to improved milk prices for dairy producers in most regions.
Senior agricultural analyst Emma Higgins explained that low profitability had led to a decline in dairy herds in key regions such as the US and South America, while recent weather-related issues had affected milk output, including reduced rains in New Zealand and excess rains in Europe.
Higgins stated, “This constrained global milk supply growth should support ongoing dairy market recovery and price improvement for dairy producers worldwide.” However, she cautioned that the recovery would face challenges.
“Global demand signals are mixed, with consumers’ purchasing power still under pressure. Despite low unemployment levels in major markets, consumer sentiment remains pessimistic. Inflation remains high in many countries, and elevated interest rates are impacting debt and consumer spending, particularly as credit has played a crucial role in recent years.”
Regarding New Zealand’s dairy sector, Higgins mentioned that Chinese milk production forecasts had been revised upward from 2 percent to 3.2 percent for 2024, posing a challenge to Rabobank’s milk price forecast for the upcoming season.
“The growth in Chinese milk output is particularly significant for New Zealand’s dairy industry, as over 30 percent of its dairy exports go to China. We view this increase in Chinese milk production as a downside risk factor for New Zealand’s farmgate milk price.”
