Global dairy industry to gradually recover in 2024 despite supply challenges, says Rabobank Analyst

GLOBAL – The global dairy industry is anticipated to experience a gradual recovery throughout 2024 after two consecutive quarters of diminished milk production, according to Lucas Fuess, senior dairy analyst at Rabobank.

Speaking at the International Sweetener Colloquium in Aventura, Lucas revealed that the key dairy markets, including Europe, New Zealand, and the United States, face challenges impacting milk supply.

He highlighted adverse weather conditions, tight profit margins, and sustainability and regulatory issues as major factors that contributed to the decline.

“In the United States, seven consecutive months of reduced production have led to the lowest milk cow numbers since 2019. Farmers, grappling with tight profit margins, are culling cows, and replacement numbers are at decade-level lows,” he stated.

Despite the constrained supply, Fuess did not anticipate dramatic bullish swings in the market.

He noted that the current situation differs from 2022 due to a less pronounced supply pullback and weaker demand.

However, he predicted a theme of slow but steady price increases in 2024, with the potential for more upside than downside.

“One factor supporting the market is the prospect of improved profit margins, attributed to higher milk prices and lower feed costs,” he highlighted.

Fuess added that the dominance of Class IV milk, used for products like butter, dry items, and evaporated or sweetened condensed milk in consumer-type packages, has maintained a premium over Class III milk due to increased cheese production.

Despite lower milk access, Fuess expressed confidence that milk would flow abundantly to cheese processors, driven by the industry’s robust growth and the opening of new cheese plants in 2024 and 2025.

While global butter prices have reached record highs multiple times, Fuess noted that ample cream supplies haven’t mitigated production struggles to keep pace with soaring demand in both the United States and Europe.

“In the realm of dry dairy products, nonfat dry milk prices have remained rangebound, despite stocks being at their lowest since 2015. Conversely, dry whey has exhibited strength, driven by increased demand for higher protein products.”

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