Global dairy quarterly Q4 2023: Shifting to the next phase of the cycle

As 2023 draws to a close, the global dairy market continues to walk a tightrope of limited “new” milk and sluggish demand. Looking back on 2023, it is a story of soft global dairy commodity pricing due to weaker underlying fundamentals. Milk supply growth around the globe was underwhelming in 2023, with a brief return to growth for three consecutive quarters before lower milk prices, elevated costs, and weather disruption put the brakes back on. The global markets patiently awaited the rebalancing of the Chinese market, only to experience the second consecutive year of large shortfalls in net dairy imports.

Looking to 2024, the global market is transitioning to the next phase of the cycle. There is growing evidence that the bottom in the dairy commodity markets has passed, and the general trend is for prices to move higher through 2024.

Milk supply growth will be sluggish in 2024 across most export regions. Stock levels in the export regions are comfortable but not burdensome. This means that international dairy buyers must keep a close watch on supply availability amid structural weakness in production growth in some export regions. The New Zealand seasonal flush has passed with modest growth, and markets await seasonal increases from the Northern Hemisphere in 1H 2024.

The next phase of the demand story remains key to watch. It’s a complex story of high dairy inflation, broader cost-of-living issues, and weak consumer confidence remaining on the horizon. Sluggish underlying dairy demand and changes in consumer purchases are impacting volumes in some economies and channels. Demand settings are on the mend, but market uncertainty remains due to rising unemployment in some economies. Its ongoing impact on consumer purchasing power will be a watch for 2024.

China’s import appetite for dairy commodities is still expected to drive any Oceania commodity price rally in 2024. Rabobank expects China’s import volume to flatline in 2024, which would be a positive result, given the previous two years of withdrawal from the global markets. This is an opportunity for importers outside of China to build stocks in 2024. Prices are moving modestly higher, from low bases, and the current demand signals have yet to trigger a rush to take coverage.

In Rabobank’s view, the base case is for a slow recovery in commodity prices back to long-term averages. However, current fundamentals provide the perfect ingredients for price volatility and a possible market whiplash. A high degree of risk and uncertainty permeates all global markets, including dairy. Geopolitical instability risks, volatile energy markets, and weak macroeconomic conditions will be something to watch in 2024 for the global dairy markets and the broader food system.

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  • Michael Harvey

    Senior Analyst – Dairy & Consumer Foods
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  • Mary Ledman

    Global Sector Strategist – Dairy
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  • Lucas Fuess

    Senior Analyst – Dairy
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  • Michelle Huang

    Analyst – Consumer Foods
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  • Emma Higgins

    Senior Analyst – Agriculture
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  • Richard Scheper

    Analyst - Dairy
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  • Andrés Padilla

    Senior Analyst - Beverages, Dairy,Packaging & Logistics
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