“Growth in milk supply—which turned positive in Q2 2017—accelerated in Q3 2017, but the growth in the exportable surpluses has not come without its challenges,” says Michael Harvey, Senior Analyst – Dairy at Rabobank. In particular, the Oceania spring peak has stumbled due to unfavourable weather conditions. “Growth in the global exportable dairy surpluses will continue to expand in the coming period, pressuring global markets.”
Meanwhile, geopolitical tensions and dairy policy uncertainty are contributing to the weaker market sentiment and remain key factors to monitor. Attention is now squarely fixed on production trends in Europe in the coming six months. Growth in production is expanding, but milk price signals and efforts to curb production loom as disruptors.
Meanwhile, a tinkering of the intervention scheme next season may see an increase in milk diverted to cheese and whole milk powder production in Europe.
However, Rabobank does not expect exportable surpluses to completely overwhelm global markets—helped by strategies to limit supply growth from processors.
As expected, China’s robust import programme has continued in the past few months, assisted by lower-than-expected milk supply and some improvements in demand.