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Dairy demand fragile but growing

Dairy products on wooden table, on green nature backgroundThe global dairy market outlook will remain weak throughout 2016, but with more upward pressure on prices into 2017, according to the latest Rabobank Global Dairy report.

For Australia, local farmgate prices have been largely shielded from the severe global dairy market crash. This came as a result of value-adding strategies that local producers adopted to shift milk away from commodities, according to Rabobank Australia senior analyst Michael Harvey.

“These strategies include focussing on consumer products such as liquid milk and cheese,” he said.

Harvey said this approach would undoubtedly continue to be adopted by the Australian dairy sector for the 2016/2017 season, with global dairy commodity prices remaining under intense pressure.

While the strategies being employed by the Australian dairy sector had been successful in softening the impact of the global dairy downturn locally, Harvey said, the effects of the downturn were still being felt in Australia.

Rabobank Australia senior analyst Michael Harvey.
Rabobank Australia senior analyst Michael Harvey.

“Commodities are still a core part of the product mix locally, so export returns have impacted local farmgate prices,” he said.

Farmers should have cautious expectations for milk prices in 2016/2017, Harvey said, and exercise budgeting decisions based on the current weak global market conditions.

“Looking forward, the news is by no means all bad for the dairy industry,” said  Kevin Bellamy, Rabobank’s Global Dairy Strategist.”

“With the exception of Brazil—gripped by the worst recession in a generation—Rabobank sees dairy consumption continuing to grow in Asia, as well as in the US and EU.”

Rabobank expects that, throughout 2016, slowing production growth will be matched by slow, but steady consumption growth in most main export regions.

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