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Q4 Rabobank update - Improved margins promote higher global production levels
Thursday, 19 December 2024
Production growth is expected to continue for the Big 7 dairy exporters* into 2025, while Chinese production slows. Rabobank predict a 0.8% gain, year-on-year for 2025.
Milk supply volumes have improved across the largest dairy export regions over the second half of 2024, and Rabobank predicts a 0.5% year-on-year increase globally compared to the same period in 2023, predominantly driven by gains in Oceania and the EU. The momentum is expected to continue in all seven key exporting regions in 2025. For the coming year as a whole, milk supply growth of 0.8% is forecasted against 2024.
Farmgate milk prices have been mostly favourable, and affordable feed costs are expected to continue which will support farm margins. Wholesale prices have shown signs of easing in Q4, but remain elevated.
In the EU and UK, deliveries in 2024 have been mixed. Improved weather and encouraging farmgate prices supported delivery growth for Q4, pulling the year of 2024 up to a 0.3% gain versus the previous year. A further increase of 0.5% is expected in 2025, in response to better prices, assuming that disease outbreaks lessen. Dairy farmers are expected to vaccinate against bluetongue in 2025 which should lessen the impact.
In China, stocks are rebalancing as production growth slows. Low farmgate prices as well as a heat wave in Q3 caused further exits from the industry, dampening down domestic milk supplies. Rabobank estimates a 0.5% year-on-year reduction in production over the second half of 2024 with a steeper 1.5% drop in 2025. However, better balanced production and some demand recovery in 2025 is expected to contribute toward a 2% increase in import volumes.
Global demand has been varied, with consumer spending still under pressure in many regions. The foodservice sector has suffered, while retail has benefitted from consumers trading down in some regions. Demand is expected to improve in 2025, and dairy price deflation may drive volumes sold. Overall the market is expected to be fairly well balanced.
*The Big 7 includes the EU, the US, New Zealand, Australia, Brazil, Argentina, and Uruguay
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