Global Dairy Quarterly Q2 2021: Stuck in Neutral… For Now

Dairy markets worldwide are slowly returning to normal from the pandemic-led channel distortion. However, risks and uncertainty still abound, supporting commodity pricing at elevated levels. With reduced Chinese import demand a likelihood in 2H 2021, alternative buyers’ purchasing power will be tested and will likely lead to price adjustments in the dairy markets.


Here are the report main highlights:

- Farmgate milk prices have been on a higher trajectory for most farmers. New Zealand producers are enjoying the full benefit of a strong commodity cycle. Farmer margins are broadly at breakeven or better, which is supporting milk supply growth. However, weather and feed price risks are likely to limit growth, even with some further milk price improvement.

- Grain and oilseed market prices are reaching near-decade highs. Supply concerns from adverse weather in key growing regions combined with strong demand drove prices higher. While there has recently been some reprieve, Rabobank expects feed prices to remain firm well into 2022, pressuring dairy farmer margins. 

- Rabobank forecasts milk supply growth for the Big 7 to expand by just 1% year-on-year through 2H 2022. This is below the previous forecast and the long-term historical growth rate.

- On an annualized basis, the combined exportable surplus will expand in 2021. The US is doing most of the heavy lifting after a modest flush in Europe. Attention turns to the Oceania peak, with expectations for New Zealand to have a good season but with the usual caveats around the weather. 

- Dairy demand in some markets and categories will be tested given ongoing consumer cautiousness and affordability issues.

- Global commodity markets are delicately poised, waiting for some direction. Further upside cannot be ruled out, but the peak is near. An expected softening of Chinese import demand should be enough to trigger a price correction in the dairy complex that is likely to occur in the later stages of 2021.

  • Michael Harvey

    Senior Analyst - Dairy
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  • Mary Ledman

    Global Sector Strategist – Dairy
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  • Emma Higgins

    Senior Analyst - Dairy
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  • Sandy Chen

    Senior Analyst - Dairy
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  • Andrés Padilla

    Senior Analyst - Beverages, Dairy, F&A Supply Chains
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  • Shiva Mudgil

    Analyst - Dairy, F&A Supply Chains
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  • Richard Scheper

    Analyst - Dairy
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  • Daniëlle Duijndam

    Analyst – Dairy
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  • Ben Laine

    Analyst - Dairy
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