Rabobank forecasts price rises in 2017… if supply stays tight

Published 29 November 16

Global dairy commodity prices are expected to continue to rise in 2017 due to reduced milk supplies and improved import demand, according to Rabobank’s latest outlook. It predicts producers will struggle to significantly expand production to take advantage of rising prices until at least the second quarter of 2017. This is particularly true for the EU, where the milk production reduction scheme has been put in place by the European Commission.

However, Rabobank warns that the effect of the scheme is still uncertain, particularly now farmgate prices are increasing. Participants could still choose to produce to receive the market price, rather than taking the reduction payment. If the scheme’s usage is lower than anticipated in late 2016 and early 2017, milk production could recover earlier than expected. According to Rabobank, this would put significant downward pressure on global prices next year.