Freshagenda’s latest Global Dairy Directions (GDD) outlook highlights that apart from the inevitable heavy correction in US cheese markets, global dairy markets remain relatively calm, as increased growth in milk supplies was matched by improved consumer demand and trade.
Commodity fundamentals are mixed across major producers, and regional factors continue to influence value direction.
Restrictions aimed at limiting the spread of COVID infections will continue to support retail demand while food service trade will remain weak. Given the likely lockdown approach from governments will be less restrictive that in Q2-2020, a “staggered restart” for demand for meals consumed out of the home in H1-2021 remains relevant. The risk of increased butterfat supplies through the northern winter with subdued festivities remains a risk – dependent on the extent of milk production growth. Retail demand kept markets balanced in Q2 and Q3 if 2020 but will be tested with dilution in household income support driving more cautious discretionary spending in the dairy category. The absence of US government buying, rising milk supplies and a weak greenback will aid price-competitiveness of US protein and cheese, and limit gains in export markets for competitors
Combined milk growth across major exporters will slow in the coming quarters, curbed by dry conditions in the southern hemisphere and rising feed costs. Commodity exports will remain patchy. The market will be supported by sustained Chinese demand for ingredients but there will be increased price-sensitivity with prospects of a slow recovery in SE Asia and MENA purchases at firmer prices.