A RaboResearch report expects milk supply growth from the biggest exporting regions in the second half of 2024.
Growth is expected to continue into 2025, with the analysts forecasting milk supply to increase by 0.8% in 2025.
Affordable feed costs and improved weather along with better farmgate prices are behind the hike. However, global dairy demand remains mixed amid economic pressures.
“RaboResearch expects 0.5% milk supply growth from the Big 7 export regions in the second half of 2024, driven by significant seasonal peaks in Oceania,” reported Michael Harvey, senior dairy analyst at RaboResearch.
“Supply growth will maintain its momentum in 2025, with gains expected in all Big 7 exporting regions for the first time since 2020.”
Firmer commodity prices have flowed through to dairy farmers in export regions, with local farmgate prices improving in the second half of 2024.
In parts of Europe and New Zealand, farmgate milk prices are nearing 2022 record highs. Rising milk prices and affordable feed have improved dairy farm margins, which will expand further in 2025, noted the report.
China has made considerable progress in rebalancing stocks, with milk production expected to fall 1.5% year-on-year in 2025.
“We expect China’s three-year run of declining net import volumes to end in 2025, with imports improving by 2% year-on-year,” continued Harvey.
Demand dynamics
Global dairy demand dynamics remain mixed, with consumer spending still under pressure across many economies.
Foodservice channels remain sluggish in most major markets.
“Consumers are eating at home more, supporting retail, but there are continuing signs of trading down and some reductions in purchases, particularly in emerging markets. A meaningful lift in incomes and consumer confidence are required to spur dairy demand to more normal settings,” said the analyst.
Trade uncertainties
“Global dairy fundamentals remain mostly balanced moving into 2025. There are more milk and dairy products in the pipeline, and demand should also improve in 2025. However, geopolitics, disease, and weather could influence trade and production,” cautioned Harvey.
With the election of Donald Trump, markets are watching for the risk of rising US protectionism and potential trade tensions. “A reemergence of tariffs could disrupt dairy trade flows, while the threat of mass deportations could disrupt US farm labor availability.”
Meanwhile, China’s Ministry of Commerce has launched an investigation into EU dairy subsidies that could have far-reaching consequences for European exports of liquid cream and various cheeses.
Management of disease outbreaks – avian influenza in the US and bluetongue in Europe – is also a key factor to watch, he said.
“There is optimism that vaccinations for both diseases could mitigate production impacts in 2025.”
Beef market
Looking to global beef markets and the RaboResearch team forecasts reductions in supply next year, with trade flows set to alter.
Brazil and the US are likely to lead beef production declines in 2025, but reductions in China, Europe, and New Zealand are also expected.
While North American cattle prices have been high for close to two years because of the lower cattle numbers and strong consumer demand, other regions have experienced low cattle prices.
The latest El Niño Southern Oscillation models are predicting La Niña weather conditions to persist into Q1 2025 before a transition to a more neutral pattern by midyear.
That trend will support Australian beef production.
Angus Gidley-Baird, senior animal protein analyst for RaboResearch, expects Australian beef producers to increasingly depend on exports to absorb stronger domestic production.
