Struggling milk supplies to fuel 2017 price rises

Published 20 December 16

Dairy prices are expected to continue to rally into the New Year due to struggling global milk production volumes, according to Rabobank’s latest quarterly report.

EU milk deliveries look unlikely to recover until the second half of 2017, given the financial incentives in place to cut production, as well as increased culling rates in several key regions. Oceania’s peak months have been affected by low milk prices and difficult weather, so a significant volume recovery looks unlikely until the new season begins in mid-2017.

Increased import demand from China is also expected to help price rises, though to a lesser extent than the supply reduction. However, rising commodity prices could, in turn, dampen demand from other key importing regions, which could partly self-limit the upward pressure on prices.

Stock levels are also expected to hamper prices for some products, leading to further divergence in prices for different commodities. SMP prices are likely to continue to be held back by heavy stocks, while fats should continue to rise into 2017, according to Rabobank’s forecasts.