Rabobank: Demand will drive the dairy market

After a year of pandemic and restrictions around the world, the outlook for the future of global dairy markets is clearer and more encouraging. By the middle of the year, there should be a tangible return to the usual consumer models.

This will not happen immediately and, of course, not smoothly, but in general it is positive for the dairy markets.

Rabobank forecasts a 1.1% increase in milk production in G7 dairy regions in 2021. This decline compared to a 1.6% year-on-year increase in 2020 represents a modest reduction in supply that should help support as demand stabilizes post-vaccination.

“In the short term, Chinese import demand is up, but is expected to slow down in the second half of the year. High domestic milk prices are spurring interest in expanding domestic milk production, which could reduce future import needs,” said Ben Laine, Dairy Analyst at Rabobank.

High milk prices favored imports of whole milk powder (WPM) earlier in the year, but this demand may stall after the recent price surge in Oceania. Milk prices in China have probably peaked and will start to decline from now on.

In 2021, demand will lead. “Throughout the pandemic, its impact on global milk supply has been much smaller than on demand. The disruptions arose as consumers made significant changes to their consumption patterns that impacted supply chains. For the most part, these shifts were abrupt and severe when we entered the crisis, but the exit should be smoother,” Laine explains.

The economy of most countries in 2021 will grow compared to 2020. Rabobank projects global GDP growth of 4.5% year-on-year by 2021, compared to a contraction of -3.8% in 2020.

The impact of universal vaccination should be felt by the middle of the year, which will positively affect economic activity. Some aspects of recovery still have a long way to go.

Arenas or convention centers may not be full this year, but restaurant restrictions are likely to be lifted. This will positively impact demand for dairy products, especially in markets such as the US , where more dairy products are consumed through food service channels than at home.

Also in the US, the situation is not bad for whey and skim milk powder producers, although exports are currently difficult due to packaging problems. These logistical problems lead to a wide spread in US prices compared to the rest of the world. However, whey demand from China remains strong and transportation issues should be resolved by the end of the second quarter of 2021.

PioneerProduct based on dairyindustries.com