Dairy Quarterly Q4 2019: Farmers Welcome Higher Prices – Will Consumers?

Milk and dairy product prices are on the rise, but the ability to pass on these increases through the supply chain to consumers is a challenge, according to the latest RaboResearch Dairy Quarterly report, Farmers Welcome Higher Prices. Will Consumers?

“Higher commodity prices are a welcome change for dairy producers,” said Ben Laine, RaboResearch dairy analyst. “However, as those prices work through to consumers, their willingness to pay higher prices at restaurants and grocery stores remains to be seen, with much of the world either recovering from, in the midst of, or on the verge of some degree of recession.

EU milk production is poised to grow in 2020, albeit modestly and from low year-ago levels. There are a number of hurdles to herd expansion, including environmental regulations.

Import demand from China is expected to continue to rise, although it will likely be weaker in the first half due to higher carry-over stocks and strong comparables. The potential for weaker domestic demand in the face of economic woes could further reduce the need for imports.

Combined milk production growth among the Big-7 milk-producing regions is expected to remain at, or slightly below, 1% through Q1 2021.

Cheese and SMP are taking the spotlight from butter in the latest price rally. Butter prices have mostly stabilised after varying degrees of decline around the world. Whey prices are gradually improving, but still face limitations due to the reduced demand for pig feed in China.

As market demand shifts towards protein and away from butterfat, processors will need to re-evaluate the product mix in order to capitalize on this reversal from the recent norms, which could lead to greater price volatility than experienced in the past few years.

Much more can be found in Rabobank’s Dairy Quarterly Q4 2019 report. Click here to download the report

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