Global dairy markets remained relatively stable through Q3-2020 – with the obvious exception of cheese prices in the US. Sustained retail sales, refilling foodservice channels, the cushion of government aid and slow milk supply growth have combined to keep prices steady and firming in many cases. This has been aided by strong trade volumes as buyers took advantage of the savage dip in prices in Q2-2020.
While milk supplies from the top 12 exporters are forecast to increase by 1.3% in H2-2020, our analysis of projected fundamentals suggests that product values will remain relatively stable, with some important exceptions. The US cheddar market will weaken as block cheese supply improves with rising milk supply and additional capacity, while butterfat markets are exposed in all regions to weaker food service demand, which in the US and EU will force higher cream volumes into the butter churn.
The changes in mobility and shopping habits will continue to affect the composition of demand for dairy products and ingredients. A deep recession is unfolding as the effects of early stimulus measures wear off and governments brace for the impact of employment losses and business closures on household spending. While developing world markets tend to respond to product prices rather than GDP changes, the uncertainty ahead will keep buyers cautious, and any outlook must consider risks of slower demand