There are no significant issues for dairy producers with prices and availability mostly being favourable.
Rabobank is predicting a $9.70/kg MS dairy forecast for the 2024-25 season, up from $8.60/kg MS in its previous quarterly report.
A $10/kg MS was entirely possible but there are still a number of risks to the milk price for farmers to be wary of, RaboResearch senior agricultural analyst Emma Higgins said.
“A $10/kg MS milk price could be achieved if strong milk flows from New Zealand are consistently absorbed by markets, Chinese demand for New Zealand dairy products continues to improve, and other regions face production headwinds – particularly over the shoulder of the season,” she said.
“However, there are many uncertainties on the horizon for 2025 which also bring commodity price volatility risks.”
In weighing up those factors, the bank landed on $9.70/kg MS, Higgins said.
The bank’s fourth quarter report, A Period of Prosperity, said the second half of 2024 marks a turning point for milk supply growth across the big seven dairy export regions (Australia, New Zealand, Argentina, Uruguay, Brazil, the EU, and the US).
The year-on-year production gains for the second half of 2024 are forecast at 0.5%, offsetting last year’s 0.5% decline across the same period.
Milk prices are now trending higher in most regions around the world. There are no significant issues for dairy producers with prices and availability mostly being favourable, Higgins said.
“This combination of rising milk prices and affordable feed mean dairy farm margins have improved. More money will likely mean more milk for 2025.
“We anticipate supply growth across the big seven will maintain momentum in 2025, with gains expected in all regions – the first time this has happened since 2020.
“While milk supply is growing for exporting engines, the volume growth is not expected to overwhelm the global markets, with RaboResearch forecasting milk supply growth of 0.8% next year.”
This was in direct contrast to that unfolding in the Chinese dairy market with domestic milk prices remain near 10-year lows, triggering herd reductions and farm exits, particularly among smaller operators.
On the demand side, the report says, global dairy demand dynamics remain mixed with consumer spending still under pressure across many economies, and the impact on dairy purchases continues to play out.
“Chinese dairy demand also remains sluggish, however there is some optimism the bottom of the cycle has passed, and this is helping to move markets higher.”
Global dairy fundamentals remain mostly balanced moving into 2025, she said.
“Based upon our assumption of normalised trade, we see current dairy commodity prices supporting improved farm margins, but without causing major margin compression for food and beverage manufactures – at least for the cost of dairy products.”
Higgins said they are cautiously optimistic for the remainder of the season, but the possibility of getting pricing whiplash is high, and history shows the risk for markets to overshoot is clear.
Other factors to watch over the coming months include the risk of rising US protectionism following the US elections along with management of disease with bird flu continuing to spread in the US and Bluetongue in parts of Europe.
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