Global dairy prices may fall as exporters ramp up production

Global dairy prices may have peaked, meaning commodity prices might soon start to fall as production in exporting regions looks set to increase. 

According to analyst Rabobank’s latest quarterly report on the global dairy market, higher farmgate milk prices have encouraged producers to increase supply and so key exporting regions are showing signs of increasing milk production.

Global markets are well balanced and have, therefore, had a period of relative stability in quarter three, but an increased supply is expected to stop the price rise and lead to a fall.

See also: China: What are the dairy opportunities for UK producers?

However, China’s production forecasts have been revised downwards, says AHDB Dairy, as a hot summer affected volumes and increased farmgate prices not seeing the same recovery for larger farms.

Combined with China’s growing demand for dairy from a rapidly expanding middle class, this increased demand on world markets should help balance the market and prevent an oversupply situation.

A price fall should, therefore, be more gradual.

Where is production increasing?

• EU: production is in slow recovery after the milk price crisis and production is at its healthiest since last year.
• US: favourable weather had helped improved milk production and there have been 40 consecutive months of milk supply growth, which is expected to continue.
• New Zealand: wet weather has hampered production in August and expected growth is mixed. Provided conditions improve, Rabobank expects strong production growth in the 2017-18 season. One to watch, as a key player on the global dairy market.
• Australia: production will have returned to growth in quarter three after seven quarters of decline. Although AHDB says this recovery is not certain.
• South America: Argentina and Brazil are seeing higher production. More expected to be available to export, as domestic demand is dampened by political and economic challenges.