Spring has firmly arrived, with fieldwork well underway in a new season and milk production at its seasonal peak. However, farmers are likely hoping that the coming arrival of June Dairy Month – complete with plenty of ice cream to kick off summer – will bring with it higher milk prices driven by stronger demand. Especially in the cheese market, prices have struggled in recent months, keeping the Class III value weak and delaying any substantial margin recovery. Into the remainder of this year, signs are emerging that milk revenues will improve, but it will likely be a slow recovery taking place over months, not weeks.
Globally, milk supply growth continues to struggle, with the first quarter of this year similar to the trend that emerged in the second half of 2023 with weaker year-over-year production from the key exporting regions. Rabobank forecasts less supply will persist throughout this summer before volume turns positive into the second half of 2024.
After two consecutive quarters of weaker supply, typically, a firmly bullish price response would have materialized, similar to the output pullback in 2021 that was followed by, in some measures, record high prices into 2022. However, the supply and demand balance is different this time, with lower milk production relatively neutralized by sluggish global demand in recent months. Less milk has been shrugged off by global buyers sitting on adequate inventories and macroeconomic worries that persist. Looking ahead, there is increasing evidence that demand is on the upswing, but it will take time before prices are driven higher.
By LUCAS FUESS
May 2, 2024
