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Rabobank’s Global Milk Outlook for 2024 and 2025

In its Global Dairy Q3-24 report, Rabobank indicates that global milk production has been inconsistent in recent years, driven by factors such as unpredictable weather, fewer cattle, and high feed costs. Despite these challenges, Rabobank expects a modest supply increase from the world’s top seven milk-producing regions, the European Union (EU), the United States (US), New Zealand, Australia, Brazil, Argentina, and China, during the second half of 2024 (H2-2024), attributed to recent improvements in milk prices and cheaper feed.

Several factors influence this market outlook. For example, the ongoing geopolitical instability in the Middle East may weaken demand for dairy powders and elevate shipping costs. Additionally, the return of La Niña weather patterns later in 2024 is expected to impact global production, particularly in regions like New Zealand. In China, milk production growth is forecast to halt by 2025, while butterfat prices will likely remain strong in the short-term. Other factors include China’s anti-subsidy probe into EU dairy imports and the spread of bluetongue disease in Europe, which could affect milk yields.

Regionally, milk production in the EU is expected to grow by 0.7% year-on-year (YoY) in 2024 but will slow to under 0.5% YoY by 2025. In the US, rising milk prices and cheaper feed are expected to stabilize production in the near future. Improving weather conditions on the North Island of New Zealand is boosting optimism for the upcoming season. Australia’s milk supply has been steadily recovering, with production up by 3.1% YoY in the 2023/24 season and a further 1.5% YoY rise expected for 2024/25, supported by strong export growth.

In Brazil, milk production increased by 3.5% YoY in the first half of 2024 (H1-2024), driven by favorable feed costs and rising demand. Margins have reached their highest level in 12 months, with strong domestic demand expected for the rest of the year. After a severe contraction due to drought, Argentina’s milk production has stabilized, with a 2.3% YoY growth forecasted for 2025. In China, milk production increased by 3.4% YoY in H1-2024, though growth is expected to slow, leading to a projected decline of 0.5% YoY in 2025 as farms consolidate. Weak consumer demand and increased domestic production have led to a projected 12% YoY decrease in dairy imports for 2024.

Dry Cream Market Expected to Grow with AAGR of 7.5% to USD 1.7 Billion by 2031

According to Market Research Intellect, a platform providing market intelligence and research reports, the global dry cream market was valued at USD 957.1 million in 2023 and is projected to nearly double to USD 1.7 billion by 2031, with an average annual growth rate (AAGR) of 7.5%. This growth is driven by increasing demand from industries such as food and beverage production, cosmetics, and pharmaceuticals. A significant factor contributing to this growth is the rising use of semi-finished products, where dry cream is a key ingredient.

Dry cream is particularly favored in regions with hot climates and limited refrigeration due to its extended shelf life compared to fresh cream. Urbanization and evolving consumer lifestyles, particularly in Latin America and the Asia-Pacific region, are boosting demand. The market is also benefiting from the increasing consumption of processed and ready-to-eat foods, where dry cream enhances taste and texture. Major consumers include bakeries, confectioneries, beverage companies, and the foodservice industry, especially cafes and restaurants. Overall, rising global dairy consumption is expected to sustain demand for dry cream.

However, the market faces challenges. Fluctuating raw material costs, especially milk prices, could drive up production expenses and reduce profitability. Regulatory requirements for dairy production and food safety also pose challenges for producers. Moreover, as health-conscious consumers grow more concerned about the high-fat content of dry cream, there is a potential risk of decreased consumption. Competition from plant-based alternatives, including lactose-free options, is another emerging threat.

New Zealand

New Zealand’s Milk Production Expected to Rise Due to Government Support and High Global Demand

The United States Department of Agriculture (USDA) forecasts continued growth in New Zealand’s milk production from Aug-24 to Oct-24. This projection follows a report from CLAL, a global dairy market analysis platform, which noted that New Zealand's milk production reached 310 thousand metric tons (mt) in Jul-24, a 26% month-on-month (MoM) increase and 8% higher than the same period in 2023.

The positive production outlook is partly driven by the New Zealand government's plans to ease farmers' concerns about the high costs of meeting new carbon emissions requirements by reducing these regulations for the agriculture sector. Additionally, global factors such as reduced raw milk production and disruptions in supply chains, including those caused by Houthis’ terrorist attacks in the Suez Canal, have boosted demand for dairy products from New Zealand.

Dairy exports play a key role in New Zealand's economy, with half of the country's exports to Malaysia consisting of dairy products. Ingredients like whey protein isolate (WPI), whey protein concentrate (WPC), and milk protein concentrate (MPC), produced by the New Zealand cooperative Fonterra, are also in high demand in Japan, where consumers are increasingly spending on nutrient-enriched foods. Fonterra projects that global demand for high-fat cream will rise by 4% between 2023 and 2032. Additionally, the market for high-protein dairy products is expected to grow by nearly USD 10 billion over the next four years, with an annual growth rate of 7%.

However, the outlook for New Zealand's dairy exports to China remains uncertain due to rising domestic milk production in China, which may reduce the need for imports.

Ukraine

Ukraine Registers Increases in Exports and Drops in Imports

According to the Association of Milk Producers, Ukraine exported 10.38 thousand mt of dairy products in Aug-24, a 10% MoM increase and a 13% YoY improvement despite declining milk production. This shipment was valued at USD 24.92 million, marking a 13% MoM increase and a 19% YoY growth. The leading export categories by value were milk and condensed cream (+26% MoM), butter (+26% MoM), ice cream (+18% MoM), and cheese (+17% MoM).

The Association of Milk Producers indicates that the growth in Ukrainian dairy exports was driven by global factors such as a shortage of fats, reduced milk production in various regions, rising global commodity prices, and the devaluation of the Ukrainian hryvnia. Despite increasing raw milk prices in Ukraine, they remain lower than those in Europe, making Ukrainian dairy products, particularly butter, attractive in foreign markets. However, Ukrainian exporters continue to face challenges, including the difficulty of scaling up milk processing at factories due to frequent long-term power outages.

On the import side, Ukraine brought in 4.55 thousand mt of dairy products in Aug-24, registering a 2% decrease compared to Jul-24 and Aug-23. While imports of most dairy products declined, there were notable increases in buttermilk (+12% MoM), cheese (+6% MoM), and ice cream (+16% MoM). These products were mainly imported from the EU, the United Kingdom (UK), Switzerland, Norway, Serbia, and Moldova.

2. Weekly Pricing

Weekly Powdered Milk Pricing Important Exporters (USD/kg)

Yearly Change in Powdered Milk Pricing Important Exporters (W37 2023 to W37 2024)

Germany

In W37, Germany's powdered whole milk prices averaged USD 3.20 per kilogram (kg), reflecting a 2.89% week-on-week (WoW) increase and a 2.24% MoM rise. These price hikes are largely due to reduced milk production, driven by heat stress and the spread of bluetongue disease. According to the USDA, several Western European countries, including Germany, France, and the Netherlands, experienced milk yield declines in Aug-24 as a result of the hot weather. Additionally, the recent outbreaks of bluetongue virus in dairy farms have further pushed prices upward by potentially limiting the raw milk supply.

Belgium

Belgium's powdered whole milk prices averaged USD 3.86/kg in W37, marking a 2.39% WoW increase and a 2.93% MoM rise, reaching the highest level since W11. This price surge is likely due to a reduction in milk supply caused by the hot weather in Western Europe in Aug-24, as reported by the USDA. The heat likely impacted milk production, contributing to the upward price movement.

Netherlands

In W37, skimmed milk powder prices in the Netherlands fell to USD 2.50/kg, reflecting a 3.10% WoW decline, the lowest level in four weeks. This decline can be attributed to sluggish demand, as consumers are still recovering from summer activities. Additionally, the focus has shifted toward butter and cheese production in preparation for the Christmas season, further reducing demand for skimmed milk powder.

France

Semi-skimmed milk powder prices in France rose by 1.81% WoW in W37, reaching USD 3.94/kg, up from USD 3.87/kg in W36. This price also represents a 0.51% MoM rise and a significant 64.17% YoY jump. The price increases are linked to a decline in milk supply, caused by hot weather and bluetongue outbreaks in northern France, which have reduced resources for milk powder production. In response, the French government has ordered vaccine doses and is planning to launch vaccination campaigns in Oct-24.

Poland

In W37, Poland's skimmed milk powder prices averaged USD 2.32/kg, marking a 3.57% WoW rebound. However, prices still reflected an 8.30% MoM decline and an 11.45% YoY drop. The recent price recovery can be linked to a decrease in milk collection due to unfavorable weather conditions in Poland. According to the European Commission (EC), parts of Poland, the southern Baltic region, Greece, most of the Balkans, Ukraine, and southern Russia were under drought warnings in mid-Aug-24. Higher-than-average temperatures and lack of moisture have reduced crop and forage production, further impacting milk collection.

3. Actionable Recommendations

Strategic Planning for Milk Supply Chain Resilience

Given the inconsistency in global milk production due to unpredictable weather, fewer cattle, and high feed costs, stakeholders in the dairy industry should prioritize risk mitigation strategies. Dairy producers in key regions should invest in sustainable agricultural practices and weather-resistant feed alternatives to minimize the impact of environmental fluctuations. Diversifying suppliers and strengthening relationships with feed producers will help stabilize production costs. Manufacturers should also explore options to diversify their product portfolios, potentially focusing on high-demand products like butterfat and high-protein dairy, to maximize profitability during periods of supply instability.

Leveraging Growing Demand in the Global Dry Cream Market

With the global dry cream market expected to grow at a 7.5% AAGR, manufacturers should take advantage of rising demand from sectors like food, cosmetics, and pharmaceuticals. Companies should focus on expanding product lines to include semi-finished ingredients for convenience and processed foods, particularly in emerging markets like Latin America and Asia-Pacific, where urbanization and changing consumer lifestyles are driving demand. Addressing challenges like fluctuating milk prices and regulatory requirements can be managed by securing contracts with stable milk suppliers and investing in compliance technology. Additionally, exploring low-fat and plant-based dry cream alternatives will help mitigate potential market shifts toward health-conscious products.

Maximizing Dairy Export Growth Through Government and Global Market Alignment

New Zealand’s expected increase in milk production due to favorable government policies and rising global demand presents a significant opportunity for exporters. Dairy companies should align their production strategies with government initiatives to reduce emissions costs, further enhancing their competitiveness. Fonterra and other dairy cooperatives can strengthen their market position by focusing on high-demand products like WPI, WPC, and MPC for markets such as Japan. While uncertainty surrounds the Chinese market, exporters should diversify into regions with growing demand, such as Southeast Asia, and ensure they maintain agility in adapting to shifts in global supply chains due to events like the Suez Canal disruptions.

Sources: Milknews, Progressivedairy, Rabobank, AgroPortal.ua