While UK farmgate milk prices are slashed again from 1 August, the global dairy commodity market outlook is for stable pricing through July to September, predicts worldwide banker Rabobank.
This would be followed by a slow squeeze in the final quarter of 2012, with price recovery in early 2013.
Dairy commodity prices fell through April and May, with prices pushed down by exceptional supply growth in export regions, it said. A small rally followed in June as the market started to rebalance.
Stock levels were significant but not alarming, said Rabobank, which expects gradual rebalancing as milk production growth slows in response to farmgate price cuts made earlier in the year.
“With import demand expected to continue to show modest growth on already record levels, the market should enter a slow squeezing phase by the fourth quarter (2012) as existing stocks are worked through.
“A weak euro will help restrain the initial pace of recovery, encouraging more EU product onto the world market,” said the report.
“Assuming the continued loss of supply momentum, and even a small demand improvement, the market will significantly tighten in early 2013.”