Elevated commodity prices – driven by both the tightness of the domestic EU market, and China’s stronger demand which drove a higher involvement in GDT events – will continue to unwind.

The expected continued slow growth in EU-27 milk production should keep fat and protein values relatively stable, although some short-term “drift” is happening as the weather outlook is better. Feed prices have eased a little and a more normal summer is forecast.

The strong growth in US milk output will remain a factor for much of H2-2021 and will continue to affect global SMP and (possibly) cheese prices if domestic demand doesn’t recover quickly. The worsening west-half drought could slow output more quickly, but farm margins should get a little better and no sudden fall in cow numbers is on the radar.

The recovery in population mobility is driving a steady change in meal occasions in developed dairy markets. A large “bursting-out” phase will pass before the reality hits of lower household incomes and the risks of (still) living with COVID.

The pushback from a far more price-sensitive market in both developed and developing regions, where NZ has a large exposure, is likely to continue to weaken butterfat prices, while protein balance sheets should remain tighter.

The shifts in demand between retail and foodservice channels are well underway in most regions but none are more seismic than in the US with the layered complexity of regional milk and product output. A hot northern summer could help on both ends of the supply chain.

China continues to hold the global commodity market together, dominating recent growth in the trade. Its internal economic recovery and tight milk supplies don’t suggest that support will collapse any time soon.