Rabobank Global Dairy Quarterly Q2 2018: Steady as She Goes… For Now

Combined milk supply growth across the Big 7 has stalled, with the pace of growth below expectations through the Northern Hemisphere spring peak. As a result, most dairy commodity markets have seen prices rally in Q2 2018, but with mixed results across regions and products. Butterfat and cheese prices have fared reasonably well, supported by buoyant demand, according to the latest RaboResearch report ‘Dairy Quarterly Q2 2018: Steady as She Goes… For Now’.


In Q2 2018, combined milk supply growth of the Big 7 exporting regions came to a near standstill. Output increased just 0.5% YOY, the lowest since the end of 2016, despite Northern Hemisphere production being in full swing and New Zealand having a better finish to its weather-challenged season. Year-on-year growth in Europe and the US failed to meet market expectations, which set the tone for a more bullish market.

“Global butter markets continue to be elevated and act as a constant underlying force in the dairy markets”, according to Michael Harvey, Senior Analyst – Dairy. “The European butter prices have rallied, but have yet to hit 2017 record highs. However, 2017 price levels are likely to be tested during 2H 2018.”


Combined global milk supply across the major export regions is expected to grow, albeit at a very modest rate of 0.4% in Q3 2018. Not surprisingly, year-on-year growth in the net exportable surplus from the Big 7 will be limited in 2H 2018, before gaining some momentum in Q1 2019.

Without a disruptive event, global dairy markets are entering a period of relative stability in 2H 2018. Dairy commodity prices are expected to be largely range bound. But it is not all clear skies ahead for global commodity markets. While some inroads have been made clearing EU intervention stocks, 300,000 tonnes of uncommitted SMP remain. In addition, US non-fat dry milk stocks are higher than the prior year. India, too, has a growing stockpile of SMP.

Click here to download the report