Rabobank confirms that world milk output has flat lined

According to Rabobank, the final milk production tallies for the fourth quarter of 2018 are complete. Collections from the ‘big 7’ regions screeched to a standstill, barely lifting at 0.1% year-on-year.

However, farm-gate milk prices were unable to mitigate expensive inputs, with margin squeeze resulting in most major exporting regions unable to significantly boost output.

US milk flows struggled to match historic averages, with growth at just 1% for the year. The EU continues to trail year-on-year. Tumbling milk collections in Australia are set for double-digit declines for the season.

Dairy Analyst at Rabobank, Emma Higgins, commented: “A diverging milk collection theme is apparent for other parts of the southern hemisphere. Brazilian milk supply has increased despite modestly rising production costs.

Meanwhile, New Zealand posted stronger-than-expected milk production growth before stalling in February 2019.

Rabobank analysis suggest that a challenging milk production environment is set to continue during the first half of 2019.

Lingering weather impacts on feed quality and quantity will continue to play out for the EU, Australia, and now New Zealand for the closing months of the 2018/19 season.

Indicative first-quarter ‘big 7’ collections in 2019 show a small decline in year-on-year milk production growth for the first time since 2016, while second-quarter production also looks set to end in negative territory.

The latest Rabobank report on the state of international dairy markets indicates that chaos reigns with regard to the Brexit situation, while trade war tremors continue to reverberate across continents as US tariffs remain firmly in place.

Global economic growth is looking gloomier for the coming years. Rabobank economists anticipate a US recession in the second half of 2020. More specifically for dairy, US retail sales are wobbling along, and the outlook remains challenging, with price points set to rise.

Economic challenges in South America continue to impact consumption, while retail sales in Australia remain patchy. US food service demand, however, remains steady, while modest EU consumption growth is forecast for 2019.

Where dairy exports are concerned, Rabobank is predicting that volumes will remain tight across the remainder of 2019, with production set to modestly improve into 2020.

Close attention is being paid to the performance of dairy and food companies with an exposure to the Chinese market. There are some signs of weaker economic conditions leading to lower-than-expected sales.

Chinese milk production statistics have been at odds with those from different government agencies, making it all the more difficult to gauge the magnitude of production growth. Rabobank maintains 1% production growth for 2019. If production growth exceeds this meaningfully, China’s import appetite could be reduced.