Tightening milk supply, reduced stocks, and price stability continue to be the key themes permeating across global dairy markets, according to Rabobank’s Dairy Quarterly Q2 2019 report.. Not surprisingly, milk powder prices performed well in Q1 2019, posting year-on-year increases of over 30% on the back of lower milk supply and falling stocks. In contrast, the fat complex was more broadly stable.
“Looking forward, global supply and demand fundamentals will continue to support commodity prices at current levels in Q3 2019,” according to Mick Harvey, Senior Dairy Analyst at Rabobank. “However, further upside in commodity prices is limited. Inventory levels on the buy-side have improved following a period of more aggressive purchasing. Also, the milk supply curve will turn positive against low comparables in the coming quarter, albeit very slowly.”
Given the modest milk supply profile from the Big 7 forecast for 2H 2019, the net exportable surplus will remain squeezed for the time being. Q1 2020 is still the timeframe for a return to growth of the combined net exportable surplus.
Based on Rabobank forecasts, the global commodity market has peaked for now. However, fundamentals over the forecast period will prevent a severe down-cycle as we move into 1H 2020.
Much more can be found in Rabobank’s Dairy Quarterly Q2 2019 report.