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Rabobank: Global Dairy Industry Forecast Slow Growth, But Price Recovery Not Expected In 2013

Rabobank: Global Dairy Industry Forecast Slow Growth, But Price Recovery Not Expected In 2013

Rabobank Releases Q4 Global Dairy Report and Forecasts for 2013

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Rabobank released its Q4 report on the global dairy industry and predicts that milk production growth will be slow in the key export countries and will follow the trend of falling below last year’s levels in the first half of 2013.

“The fact that the first contraction in milk supply in export regions in two and a half years failed to generate a stronger rise in prices in the international market in Q4 2012 suggests two things; weaker consumption and solid forward coverage of key import buyers. While consumption is likely to continue to grow at a slow pace into 2013, current forward coverage will provide buyers only temporary insulation from what we anticipate will be a worsening supply side situation. As such, the fundamentals still point towards a market tightening as we progress into 2013,” said Tim Hunt, Global Dairy Strategist for Rabobank’s Food & Agribusiness Research and Advisory Department.

The report also highlighted some of the struggles being faced by European dairy farmers this past year. The report noted that the colder and wet summer raised the cost of inputs with extra feeding and in some cases, additional shelter due to the weather conditions. Similarly, farmers in the U.S. saw their input costs rise with the U.S. drought causing a shortage of feed supplies coupled with the year-over-year rise in fertilizer and energy costs.

Rabobank predicts that the collapse of U.S. dairy market premiums to the market will lead to lower milk prices over the next couple of months heading into 2013. Additionally, factors such as weaker supply maybe along with with domestic market growth may leave the U.S. in a position where it will have a smaller supply of milk for the world market.

The following are some of the key highlights from the report:

•Slow recovery in international dairy prices trend continues
•Milk production growth in the major export countries is projected to continue to fall below year-over-year levels heading into 2013
•The market is expected to tighten even if there is some evidence showing that there will be some improvements in demand for imports