Strong Chinese import demand sees Rabobank lift farmgate milk price forecast to $7.80/kgMS

With global dairy commodity prices boosting on the back of surging Chinese import demand, Rabobank has lifted its farmgate milk price forecast by 80 cents to NZD 7.80/kgMS for the current 2020/21 season.

In its latest Global Dairy Quarterly report – Strength ahead of Northern Hemisphere Flush – Rabobank says the high cost of producing milk in China has favoured importing New Zealand dairy products, in addition to importers seeking extra safety stock to help mitigate global shipping disruptions, and this increased demand has resulted in dairy commodity prices jumping over 20 per cent in 2021 so far.

RaboResearch senior dairy analyst Emma Higgins said while China’s import demand is expected to remain elevated over the short-term, there are signs it could slow in the second half of the year.

“High Chinese milk prices are driving China’s interest in expanding its domestic milk production, which could reduce import needs in the future,” Ms Higgins said.

“The high milk prices favoured imported WMP early in the year, but that demand could see a pause following a recent spike in Oceania prices.”

Global outlook

The report says demand will take the driver’s seat in 2021, as global dairy markets look towards a “palpable return to familiar consumer patterns” by mid-year.

“While the outlook is clearer and more hopeful than it has been for months, it will not be immediate nor without some bumps, but on balance it should be supportive of dairy prices,” Ms Higgins said.


RaboResearch Senior Dairy Analyst Emma Higgins

The report says trade logistics are one source of uncertainty, with shipping disruptions leading to a global scramble for product and adding to commodity price divergence through the first half of 2021.

“Concerns about container availability are contributing to a rush on product, driving prices higher during Oceania’s off-season,” Ms Higgins said.

“Meanwhile, other exporters, facing as much as a doubling in freight cost, are forced to discount commodity prices to remain competitive globally.”

The report says supply growth across the major exporting regions is expected to be modest over the coming year with most growth coming from the US.

“High feed costs will slow the appetite for expansion among many supply regions and the tighter supply will provide an opportunity for demand to adjust to heightened postvaccine levels, which should support prices,” Ms Higgins said.

“Expected economic growth across much of the world in 2021 is a further positive for dairy demand, however, to date, economic strength in much of the world has resulted from various forms of fiscal stimulus and the phasing out of this support does provide some downside risk.”

What to watch in Q2 ad Q3

In addition to Chinese milk prices, the report cites a number of watch factors for global dairy sector participants over the next six months.

“Key among these is the speed of the global economic recovery and, at this stage, Rabobank is expecting to see healthy global economic growth of around 4.5 per cent year-on-year in 2021,” Ms Higgins said.

“Underpinning this is the successful distribution of vaccines, which should provide the confidence to reopen many aspects of life that have been limited. However, given the unprecedented nature and pace of the vaccination effort, there remain the risks that vaccines will hit distribution hurdles or that new resistant variants of the virus will emerge.”

The report says other key watch factors for the sector include continuing shipping disruptions, high feed prices, food price inflation and on-going uncertainty linked to Brexit.


Rabobank New Zealand is a part of the global Rabobank Group, the world’s leading specialist in food and agribusiness banking. Rabobank has more than 120 years’ experience providing customised banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 40 countries, servicing the needs of about 10 million clients worldwide through a network of close to 1000 offices and branches. Rabobank New Zealand is one of the country's leading agricultural lenders and a significant provider of business and corporate banking and financial services to the New Zealand food and agribusiness sector. The bank has 32 offices throughout New Zealand.

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