Still More Milk than Market

The world is still producing more milk than the market currently needs. This imbalance is unlikely to be substantially corrected in 2H 2015, says the Rabobank Dairy Quarterly.

photo of plastic milk bottles on conveyor belt

Key highlights

  • The sharp rally in international dairy prices in Q1 was reversed in Q2, with prices falling 20%-30% in the 3 months to mid-June.
  • While market fundamentals never appeared to support the Q1 rally, fundamentals also deteriorated through Q2.
  • After falling marginally in Q1, production in key export regions again rose above prior years in April as weather improved and EU quotas were removed, enabling producers to respond to what remained profitable prices in many regions.
  • In the face of ongoing weakness in China and Russia, other buyers stepped in to take most of this product, though buy-side stocks are now large and supply-side stocks are also showing signs of growing.
  • Rabobank expects that the deterioration of market fundamentals will push back the recovery phase for international prices by at least a quarter (compared to our expectations in March).
  • US dollar prices will likely remain depressed in international trade through most of 2H 2015, as supply growth continues to outstrip demand as China continues to rebalance and buyers end their stock build programs.
  • Prices are expected to enter a recovery phase in late 2015/early 2016, after a period of slow production growth coincides with the stabilization of Chinese imports and improved consumer demand created by a period of lower retail pricing and ongoing income growth.
  • The rate of price recovery will initially be dampened by the need to work through excess stock, before it gains greater momentum in Q2 2016
Table containing quarterly dairy commodity prices (historic and forecast)
  • Tim Hunt

    Head of RaboResearch Food & Agribusiness - Australia & New Zealand Read more


RaboResearch Food & Agribusiness

PO Box 17100 (UC 053) 3500 HG Utrecht, The Netherlands