Rabobank’s most recent Global Dairy Quarterly indicates that milk prices could hold at current high levels through the first half of this year. It predicts that production for the first quarter of 2022 in the world’s major exporting regions will fall by 0.7% compared to 2021.
Rising input costs, labour shortages and unfavourable weather in some areas have limited farmers’ ability to take advantage of the current high prices by expanding production. It’s analysis also shows that strong oil prices have supported whole milk powder prices in the past, and that the buoyant demand for palm oil has limited the availability of lower-cost vegetable oils as a substitute for dairy fats.
According to Rabobank, “Dairy commodities will stay elevated through mid-year amid the constrained supply. The longer-term outlook hinges upon consumer behaviour and normalised market conditions, both being very unpredictable.”
Dairy analyst Richard Scheper is of the view that dairy commodity prices are likely to remain high for a longer period as a consequence of the current uncertainty in global markets, but he questioned whether farmers would benefit. “Despite the expected further strengthening in milk prices in the months ahead, input costs will potentially increase at a somewhat faster pace for many dairy farmers across the EU, limiting the potential to improve on farm margins,” he says.