Freshagenda’s latest Global Dairy Directions outlook for global dairy markets through the coming quarters is strongly influenced by tightening milk supplies and declining stocks in most major production regions which will remain supportive of commodity values. Right now, it’s hard to see where any supply-side relief might come from to ease the pressure.
EU milk output is barely growing compared to the prior year while the strong demand for cheese has meant production and stocks of SMP have been depleted, and butterfat supplies are also tight. While the US will continue to expand, it will be at a slower rate as cow numbers start to fall. The NZ spring has so far faltered with cool, wet conditions slowing grass growth, but warm weather is forecast and should help.
Retail demand for dairy products in the EU and US continues to cushion COVID’s impacts. As vaccination coverage gradually increases, food service channels will continue to recover but the upswing will continue to be a bit bumpier in the US where re-openings have been patchier.
Global trade has been dominated by China for the past year and while demand for milk powders will likely ease a little, the internal dynamics of that industry indicate that milk supply is trailing fresh product demand, and that imports of ingredients will continue to flow. Demand from other developing regions is patchy – mostly positive across Sth East Asia, but price-sensitivity has been evident at recent elevated prices in Africa and the Middle East. Firming prices of milk powders will continue to test affordability.