The global dairy market has been through a rollercoaster of price fluctuations in recent times. While the initial surge in global dairy prices was a welcoming sight for many, experts are now predicting a slower price recovery than previously expected. So, what factors are at play in this complex landscape?
### Weaker Global Demand
One of the key reasons for the slower price recovery is attributed to weaker global demand. As China reduces its need for dairy imports, the market dynamics have shifted. This reduced demand, coupled with increased domestic milk production in China, has led to a decrease in imports. As a result, the overall outlook for global dairy prices may face further challenges along the road to recovery.
### Production Trends
According to senior dairy analyst Michael Harvey, while China’s milk production forecast for 2024 has been revised upwards, other major dairy-producing regions are not experiencing the same growth. Milk production in key global export regions is expected to show only modest expansion in the coming months, with a potential uptick towards the end of the year.
### Recent Auction Results
Despite these challenges, the recent GDT auction saw a 3.3% increase in dairy prices, reaching US$3861 per tonne. This marks the 10th increase out of the last 12 auctions, indicating a relatively strong market performance. Various dairy products, including skim milk powder, anhydrous milk fat, butter, whole milk powder, and cheddar, witnessed price increases in the latest auction.
### Regional Insights
In the US, April saw a 0.4% decline in milk production compared to the previous year, marking the 10th consecutive month of weaker year-on-year output. However, California witnessed a slight growth in milk production due to higher milk per cow, offsetting the decline in the number of cows. On the consumer front, the US experienced an 8th consecutive month of dairy deflation, with the CPI for dairy and related products decreasing by 1.3% year-on-year in April.
### EU Market Trends
In the European Union, the average farmgate milk price saw a slight decline in April, reaching €46.31 per 100 kg. Despite this, there is optimism for near-term stability and incremental gains in farmgate milk prices in the EU. Rabobank forecasts that the 2024 EU farmgate base milk prices could average near €47.5 per 100 kg, with a potential rise to €50 per 100 kg when factoring in various criteria.
With these market dynamics in play, the global dairy sector is navigating through a period of uncertainty and readjustment. As the industry adapts to changing demand patterns and production trends, stakeholders must remain vigilant and agile in their approach to ensure sustainable growth and profitability.
In this ever-evolving landscape, staying informed and proactive is key to making sound decisions for businesses operating in the dairy sector. By keeping a close eye on market trends, production forecasts, and consumer preferences, industry players can position themselves for success in a challenging yet rewarding market environment.
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