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Global dairy markets to remain subdued on higher production
Wednesday, 15 March 2023
Global milk production is likely to increase overall in 2023 although a slight decline is expected in the second half. According to Rabobank’s latest estimates, milk production across the key producing regions is expected to grow by 0.7% year-on-year (yoy) in 2023 compared to the decline of 0.9% in 2022. This latest estimate has been downgraded from the 1% growth figure previously published. Increased culling in the US, unfavourable weather conditions in New Zealand, Brazil, Argentina and lower milk prices in the EU will all serve to limit production growth.
US milk production is forecast to grow by 1.1% in 2023. Culling has increased recently as margins got tighter, so higher yields will be needed to achieve the overall increase in production. For Q1 2023, milk deliveries in the EU and UK are expected to be up by around 1.2% yoy. In Brazil, supply is forecast to increase by 1.5% in H1 2023, while other South American regions are likely to see reduced production. Milk production in New Zealand it is expected to contract by around 1.5% for the 2022/23 full season, while no growth is likely to occur in Australia until at least 2024. China also joins the wagon of expected lower production in 2023.
Demand is also expected to be lower through 2023 as the outlook for the global economy remains gloomy. Household consumption is deteriorating with increasing inflation. In China, import demand is likely to remain sluggish until Q3 as it sits on ample stocks. More recently however, there has been some improvement in imports following the end of its zero-Covid policy.
With sluggish demand and improved milk production in the major producing regions, prices are likely to ease in the near to medium term. Higher costs of production and labour shortages will continue to weigh on production growth. The longer-term forecast remains unpredictable in light of the uncertain macro-economic scenario, tighter farm margins and lower consumer spending.
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