Rabobank Forecasts for the Global Dairy Market

In its Global Dairy Quarterly Q3 2021 report, Rabobank says that dairy demand has proven resilient to all but the most stringent pandemic-driven lockdowns to date.

Regionally, demand disruptions will still occur and uncertainty will remain, but the likelihood of major global changes in demand is low. However, in the emerging markets of Southeast Asia, lockdown conditions are often stringent and even extreme, and with less government assistance expected this year, the economic impact could be felt in the long term.

Raw milk prices tend to be high in most parts of the world, but rising milk production costs and the risk of lower prices are causing many producers to be discouraged. US milk prices have already declined after a year of strong production growth that saturates the milk market.

Logistics disruptions increase costs but do not affect the fundamental underlying market supply and demand. Exports have remained strong throughout the pandemic, and buyers have become more thrifty, proactively stockpiling products when containers are available. However, in the long term, rising costs will potentially limit demand.

A decline in Chinese import demand is expected to occur in the second half of 2021 and could put pressure on global dairy prices. In China, supply is outpacing demand, with rising domestic production accompanied by rising inventories. These factors point to the possibility of destocking later this year and into 2022.

Global dairy prices declined in the second quarter and are expected to remain in a tight range until the fourth quarter of 2021. Downside risk is more likely in 2022 if importers fail to cope with reduced demand from China .

PioneerProduct based on Rabobank Global Dairy Quarterly Q3 2021