Challenging trade logistics are leading to a scramble for product, adding to commodity price divergence through the first half of 2021, according to Rabobank’s Q1 Global Dairy Quarterly. While container availability concerns are contributing to a rush on Oceania product, in the US limited containers and a doubling of freight costs are placing downward pressure on prices as product struggles to leave ports.

Rabo expects supply growth to remain limited across the Big-7 dairy regions, with most expansion coming from the US. Prices should be supported by post-vaccine demand, as economic growth recovers in 2021 although the phasing out of government support poses some risk. The re-opening of foodservice outlets could result in some tightening in inventories as pipelines are re-stocked after a relatively idle period. Local Chinese milk price are likely peaking, with the spike in GDT WMP price closing the price gap for Oceania WMP. Rabobank expects China’s liquid milk equivalent imports to increase 2% YOY for the first half of 2021, despite a well-stocked market as tariffs on NZ products fall, but H2-2021 imports are tipped to fall 11% YOY with another 4% YOY fall forecast for H1-2022.