According to Rabobank, dairy farmers in most of the world’s major producing countries could see a return to profitability as higher milk producer costs, declining input costs, and higher dairy costs are expected to materialize in 2024 and early 2025.
The source of milk in the Big 7, comprising the EU, the US, and the EU, is expected to be the source of milk in the big 7. If the U. S. , China, Brazil, Argentina, New Zealand and Australia turn positive in the second half of 2024, the bank warns that production expansion “will take time. “.
Even in South America, where Brazilian dairy farmers are grappling with hot, dry weather and production margins are the tightest in years, and where the Argentine sector is struggling to offset falling milk production, there are signs of positivity.
In Brazil, Rabobank expects margins to increase as the year progresses, increasing customer demand for dairy products and favorable producer prices with lower feed prices. Production is expected to rise 0. 5% from 2023 levels, according to the bank’s forecast.
In Argentina, on-farm milk costs are already starting to catch up with inflation and more favorable weather conditions could help milk production from the second quarter of 2024. However, the country’s dairy industry remains in “a painful period of transition. “
On-farm milk costs are poised to recover from 2023 lows and across all regions, Rabobank predicts.
Australia is expected to gain a solid source of milk and is expected to end the season up 2. 6%, with an expansion for 2024/25 at a diversity of 3-4%. Favorable weather situations with record rainfall from autumn to January 2024 and more typical. Weather situations until May 2024 will affect production. “Dairy farmers will have a strong 2024,” the bank predicts, with milk prices peaking and marginal costs starting July 1.
New Zealand also generated higher-than-expected production which, despite a 0. 5% volume decline, generated higher dairy dry matter harvests of 0. 8%; According to Rabobank, end-of-season production is expected to decline by 0. 7%. However, the new season “starts in a better light. “
China’s weak economic outlook may simply curb the expansion of dairy consumption, Rabobank expects “a continued improvement in the balance between supply and demand, with stock levels in 2024 lower than in 2023. “In terms of milk production, Rabobank forecasts an expansion of 2% year-on-year. -year and a slowdown in the first part of 2025 with low or negative margins. The bank notes that China’s major dairy corporations have reported warnings about a loss in net profit or a sharp drop in net profit for their 2023 results.
On the import side, the bank forecasts a 1. 1% year-on-year expansion, adding a 6% improvement in total milk powder imports to 460,000 tonnes due to New Zealand’s weak and tariff-free base effect in 2023. The magnitude of the increase remains 20% below the 10-year average, the bank noted, pointing to a trend characterized by a steady decline in powder imports to China.
In the EU, the outlook is also positive: buyer confidence recovers and inflation eases. Milk, cheese and butter costs fell according to the EU-27 Dairy Consumer Price Index, while the highest sales volumes of butter and cheese materialised in the final months of 2023 in Germany, Europe’s largest domestic customer market. But across the region, customers “are selective in their spending,” the bank notes, warning that “we don’t anticipate major changes in the call for recovery in 2024. “The bank’s forecasts foresee an expansion of 0. 4% year-on-year.
In the first part of 2024, low margins at source will be helped by higher milk costs, with the bank forecasting costs in key generating regions to remain close to €50/100kg towards the seasonal peak. Operating costs in 2024 will be around €47. 5/100 kg.
Milk production across the bloc is expected to remain negative until the fourth quarter of 2024, when it is expected to increase by 0. 9% year-on-year.