As 2023 draws to a close, Rabobank says the global dairy market is walking on a tightrope of limited ‘new’ milk and sluggish demand. However, its Global Dairy Quarterly Q4 2023 report shows the market transitioning to the next phase, with prices increasing through 2024.

Limited milk supply growth and lacklustre demand led to soft global dairy commodity pricing in 2023. Still, the market remains finely balanced, and uncertainty remains surrounding underlying demand for 2024.

Global milk supply growth was underwhelming, with three consecutive quarters of growth, followed by lower milk prices, elevated costs, and weather disruption put the brakes back on, the report explained.

Rabobank’s global milk supply outlook for 2024 has weakened, with sluggish growth expected across most export regions.

Rabobank senior dairy analyst and report lead author, Michael Harvey said the milk supply export engine never fully ‘fired on all cylinders’ in 2023 and declined year-on-year in the third quarter by 0.2 per cent.

“Year-over-year milk production from the ‘Big 7’ (the EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay) exporting regions is forecast to decrease through Q1 2024 before turning positive. Overall, milk supply is forecast to grow by a modest 0.3 per cent for the entire year,” said Harvey. 

A slow recovery in prices

Rabobank said in local currencies, farmgate milk prices across the export regions will close out 2023 anywhere between 20 per cent to 40 per cent lower versus the start of the year. However, with the 2024 feed cost outlook looking more favourable, some regional milk prices have recently increased, boosting farmgate margins.

“We expect a slow recovery in dairy commodity prices back to long-term averages.

“However, current fundamentals provide the perfect ingredients for price volatility and a possible market whiplash. Geopolitical instability risks, volatile energy markets, and weak macroeconomic conditions will be something to watch in 2024 for the global dairy markets,” said Harvey.

Demand uncertainty ahead

Harvey said demand would be a key factor to watch in 2024, with high dairy inflation, broader cost-of-living issues, and weak consumer confidence remaining on the horizon.

“Peak food and dairy inflation have passed, but market uncertainty remains, and rising unemployment will further impact purchasing power in 2024. Emerging markets and low-income households are under the most pressure.

“In China, consumer prices are falling, and foodservice recovery continues, but overall consumption growth is sluggish. China’s import appetite for dairy commodities is still expected to drive any Oceania commodity price rally in 2024,” said Harvey.

Rabobank expects China’s import volume to flatline in 2024, which would be a positive result, given the previous two years of withdrawal from the global markets. This is an opportunity for importers outside of China to build stocks in 2024.

“Other factors to watch in 2024 include a mildly softer grain and oilseed price outlook, El Niño and weather-related risks, mixed livestock markets in export regions, and the impact of the Israel-Hamas war on global markets,” Harvey said.


Harvey said Australia’s milk supply had ‘modestly recovered’ in the first quarter of the new season.

“Milk production reached 2.036 billion litres in the July to September period, 0.5 per cent year-on-year higher. Growth has been elusive in Western Victoria and Northern Victoria,” said Harvey.

El Niño’s impact was becoming evident in dry conditions.

“For most of Australia’s key dairying regions, rainfall between August and October was below average, negatively impacting soil moisture. And the latest climate outlook leans toward below-average rainfall into Q1 2024,” said Harvey.

However, the report notes, dairy farmers are overall “well-equipped to combat these seasonal conditions”.

“Most dairy farmers have access to good carryover feed reserves, ample supply of supplementary feed, and irrigation water. Nonetheless, after three consecutive record winter crops, the current winter crop will decline materially” said Harvey.

Cost inflation on farm had peaked, with milk production costs moving to the next phase of the cycle.

“Feed and fertiliser input costs are expected to track closer to long-term averages, which is good news for producers. However, interest rates are still increasing, and inflation is evident across most overhead costs,” said Harvey.

Australian farmgate milk prices were set for the remainder of the season (ending 30 June 2024), remaining at or near record levels, buffering the sector from global markets.

“Australian dairy exports continue to plummet. In the first three months of the new season, export volumes are down more than 13 per cent year-on-year with big falls in milk powder ingredients, bulk cheese, and butter. Export volumes of liquid milk, a growth sector in recent years, are off 30 per cent year-on-year.

Rabobank senior dairy analyst and report lead author, Michael Harvey.
Rabobank senior dairy analyst and report lead author, Michael Harvey.

“A tight domestic milk supply is part of the story. However, export price competitiveness remains an issue given the high price of farmgate milk versus major competitors. Australia’s butter and cheese imports are up 43 per cent and 21 per cent year-on-year, respectively,: said Harvey.

Meanwhile, Australian households continue to adjust purchasing behaviours in response to an income squeeze.

“While dairy purchases are generally outperforming other discretionary food items, all signs point to some volume declines across the different channels. The dairy CPI (Consumer Price Index) for the September quarter shows it has peaked and is trending lower, but it is still elevated by historical comparison.

“In 2024, economic conditions are expected to remain sluggish, with unemployment levels widely predicted to rise,” said Harvey.

Rabobank expects Australia’s exportable surplus to gradually stabilise over the course of 2023/24, and a further recovery in milk supply will be the catalyst. However, export competitiveness will remain an issue in the near term, the quarterly report determined.

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