Global Dairy Quarterly Q2 2023: It’s Always Darkest Before the Dawn

Signs of weakening dairy demand are spreading across some markets. The cumulative effects of high food price inflation over the past 24 months, along with slowing economic activity in 2023, have translated into lower dairy demand in developed and emerging markets. Various companies in western Europe, Australia, Brazil, China, and other emerging markets are experiencing weaker-than-expected sales in 2023 (mostly in volume terms). One notable exception is the US, where current consumer demand for dairy products remains firm.

Report summary:

Global milk production is still growing but losing momentum. After a prolonged contraction of five quarters that ended in Q3 2022, global milk production began expanding modestly (against weak comparable numbers). Growth is attributed to EU and US gains, while Oceania and South America continue to see lower output in 1H 2023. Dry weather in South America and parts of Europe must be monitored and could be a key factor impacting production, particularly in Europe, during Q3.  

Lower input costs provide some relief to farm-level margins. Continued optimism about Brazil’s second corn crop, combined with large Russian grain exports, renewal of the grain corridor agreement between Russia and Ukraine, a good upcoming EU harvest, and accelerated US corn planting, continue to drive prices lower. More affordable feed provides dairy farmers some relief as farmgate milk prices decline globally. In the US, however, lower milk prices have outpaced the decline in feed costs, putting farmers’ margins under additional pressure. 

Chinese milk production growth continues while imports decline. Farm expansions and continued gains in milk yields are driving domestic milk production higher. Meanwhile, Chinese dairy imports (liquid milk equivalent, excluding whey) declined in Q1 2023, adding pressure to already weaker global prices in the short term.

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  • Mary Ledman

    Global Sector Strategist – Dairy
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  • Emma Higgins

    Senior Analyst – Agriculture
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  • Michael Harvey

    Senior Analyst – Dairy & Consumer Foods
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  • Michelle Huang

    Analyst – Consumer Foods
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  • Andrés Padilla

    Senior Analyst - Beverages, Dairy,Packaging & Logistics
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  • Daniëlle Duijndam

    Analyst – Dairy
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  • Richard Scheper

    Analyst - Dairy
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  • Lucas Fuess

    Senior Analyst – Dairy
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