Rabobank sees positive times ahead for dairy

In its quarterly report, Rabobank noted by mid-year, there should be a return to familiar consumer patterns, adding this will not be immediate, and certainly not smooth, but on balance, it should be positive for dairy markets. 

Rabobank forecasts a 1.1% increase in milk production across the Big-7 dairy-producing regions in 2021. This is a decrease compared to the 1.6% YOY increase in 2020 and represents a modest tightening of supply, which should help support markets as demand settles into post-vaccine balance.

“China’s near-term import demand is elevated, but is expected to slow in the second half of the year. High domestic milk prices are driving interest in expanding domestic milk production, which could reduce import needs in the future,”​ said Ben Laine, analyst – dairy, at Rabobank.

The high milk prices favored imported whole milk powder (WMP) early in the year, but that demand could see a pause following a recent spike in Oceania prices. Milk prices in China have likely reached a peak and will begin to soften from here.

Demand will be in the driver’s seat in 2021.

“Throughout the pandemic, global milk supply has been much less impacted than demand. Disruptions arose as consumers made significant shifts in their consumption patterns, which spilled through supply chains. Most of those shifts were abrupt and severe as we entered the crisis, but coming out should be much more gradual,”​ Laine said.

Most economies will grow in 2021 compared to 2020. Rabobank is forecasting a 4.5% YOY increase in global GDP for 2021, compared to a 3.8% contraction in 2020. The impact of widespread vaccination should be felt by mid-year, which will be positive for economic activity. There will still be a long tail to some aspects of the recovery.

Rabobank said arenas and convention centers might not be full this year, but restrictions on restaurants are likely to be lifted, and holiday gatherings are less likely to be discouraged. This will positively impact dairy demand, particularly in markets like the US, where a greater volume of dairy is consumed through foodservice channels than through food prepared at home.