Milk production in the world’s main exporting regions is beginning to recover after a weak 2022, but the increase is arriving at a difficult moment. Rabobank expects milk output in the “Big 7” exporting countries to rise 0.7% in 2023, although that forecast has been reduced from the previous 1% estimate due to higher culling in the United States and weather-related setbacks in New Zealand, Brazil and Argentina.

At farm level, dairy producers are being squeezed by a combination of falling farmgate milk prices and persistently high feed and input costs. Rabobank says those pressures are already driving more dairy cow slaughter as farmers attempt to control losses and protect cash flow. Smaller margins are also challenging processors and cooperatives, which entered the year carrying expensive inventories produced when milk prices were much higher.

The report notes that global dairy demand remains uneven. Slightly higher milk supply and softer consumer demand have weakened commodity prices in the first quarter, particularly for skim milk powder and whole milk powder. Butter and cheese have performed better, but Rabobank warns that uncertainty remains high as inflation and rising interest rates push consumers toward cheaper food choices.