Wednesday, November 14, 2018
 Global Dairy Situation Shows Tight Supplies Into 2014  

The latest report published by Rabobank’s Food & Agribusiness Research and Advisory team, suggests a look at the global dairy situation for the third quarter of 2013 will find Chinese buyers eager to snap up more dairy product and tight supplies are likely to continue into 2014.

This report also explains that a variety of factors are contributing to the realized and expected tightness in global dairy markets.

"The easing of international dairy prices from their record peak in April lasted barely eight weeks," explained Rabobank analyst Tim Hunt. "Forward pricing … suggests we are in a period of high pricing that is unprecedented in terms of level and duration."

As of mid-September, Free on Board Oceania prices for most dairy products were up from levels at the opening of the quarter. Powders and butter were just 10% to 15% below record levels, with cheese off just 3%.

Rabobank says the tightness remains supply-driven. While milk production in export regions expanded in July, improving local consumption and lack of stock has kept exports below prior year levels in recent months. Declining milk production throughout most of the first half of 2013 saw international trade in dairy product volumes fall in the second quarter for the first time in four years.

Rabobank explains that China, already the world's largest importer, swooped into the market for 27% more product in the second quarter of 2013 than in the 12 months prior, adding more tightness to an already stretched market. The report says both structural and temporary factors are pushing Chinese supply below prior year levels in the first half of 2013.

The surge in Chinese buying within a shrinking supply pool pushed many other buyers to the sidelines, sustaining extreme pricing to ensure effective rationing of product, the report adds.

Strong farmgate pricing and falling feed costs are likely to generate a solid increase in milk production in export regions during the fourth quarter and into 2014, providing some downward pressure on prices. However, with exportable supply growth likely to lag, China still on the hunt for increased volumes, and accumulated demand from sidelined buyers, price relief from the currently exceptionally high levels is expected to be delayed.

"Most likely, the prospect of any significant softening in world prices will be delayed, possibly until Q2 2014," Hunt estimates.


Source: Rabobank

Posted on Thursday, September 26, 2013 (Archive on Thursday, October 03, 2013)
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