Rabobank expects global dairy commodity prices to fall later this year despite higher farmgate milk prices across the globe failing to deliver more milk. Inflationary pressure and weather setbacks hinder dairy farm output, meaning for the first time for a decade milk production in the world’ “big seven” export regions are headed for four consecutive quarters of decline. Rabo anticipates positive YOY growth for the second half, meaning the calendar year will be 0.5% down on 2021. Weakening consumer buying power and reduced Chinese imports would weigh on demand.

In Australia, Rabo expects record farmgate prices in 2022/23, with prices jumping 15%. Despite high farmgate prices, farm margins are forecast to be lower in the new season due to cost pressures on fuel, energy, feed and labour costs. With national output tracking 3.4% behind the prior season in April, Rabobank tips a marginal recovery in local volumes when the latest round of higher prices to farmers take effect from 1 July, but noted any growth is from a low comparative. The bank’s senior dairy analyst Michael Harvey said local milk production had declined but said record milk prices for 2022/23 would provide confidence and cash flow support early in the season. Rabobank modelling for new southern Australia prices stands at $8.40kgMS with processor prices ranging from $8.25kgMS – 8.90kgMS. Harvey said the pricing signals are important as farmers face cost headwinds on several fronts, including homegrown and supplementary feed which is expected become more expensive.