Rabobank estimates that dairy producers in the Big 7 nations, which include the EU, the United States, China, Brazil, Argentina, New Zealand, and Australia, would return to profitability in 2024 and early 2025. Milk supply is expected to increase in the second half of 2024, with higher margins, rising consumer demand for dairy, and reduced production costs. However, manufacturing growth will take time.
There are hints of optimism in South America, where dairy producers have battled years of abnormally dry and warm weather, as well as tight production margins. In Brazil, Rabobank anticipates improving margins as the year develops, increased consumer demand for dairy, and reduced production costs due to decreasing feed prices. Production is expected to increase 0.5% over 2023 levels.
Argentina’s farmgate milk prices are already catching up with inflation, and better weather may help milk production rebound beginning in the second quarter of 2024. Farmgate milk prices are expected to rise, with Class IV prices remaining higher than Class III throughout the year. Australia is expected to have a high milk supply in 2024/25, with growth rates ranging from 3-4%. Production will benefit from favorable weather conditions, including record rainfall in the autumn and early January 2024, as well as more regular weather patterns through May 2024.
New Zealand’s output has exceeded expectations, with milk solids collections up 0.8%. Production is predicted to fall by 0.7% by the conclusion of the season, but the following season is likely to begin stronger. China’s dismal economic outlook may stymie dairy consumption growth, but Rabobank anticipates further improvement in the supply-demand balance. Rabobank anticipates 2% year-on-year rise in milk output, followed by a slowdown in H1 2025 due to poor to negative margins.
The EU’s demand forecast is encouraging as consumers recover confidence and inflation falls. According to the EU-27 dairy consumer price index, milk, cheese, and butter prices have all fallen, but butter and cheese sales volumes in Germany have increased in the last months of 2023. The bank anticipates a 0.4% year-on-year increase in demand.
Weak farmgate margins will improve in the first half of 2024, thanks to rising milk prices. Milk output in the bloc is expected to stay negative until Q4 2024, when it is expected to improve by 0.9% year on year.
