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Strong Chinese import demand and modest global supply growth prompt lift in Rabobank milk price forecast

With Chinese dairy import demand remaining strong and global dairy supply growth stuck in neutral, Rabobank has increased its forecast farmgate milk price for the 2021/22 dairy season to NZD $8.00/kgMS.

In its recently-released Dairy Quarterly report – Stuck in Neutral…..For Now, Rabobank says Oceania-origin dairy commodity prices were mostly flat in the last quarter and continue to trade at elevated levels in comparison to last year.

“China continues to drive global trade and its healthy appetite for dairy imports over recent months has acted as the primary pillar of price support in the year to date,” RaboResearch Senior Analyst Emma Higgins said.

“Import demand in China has been boosted by the ongoing recovery of its food service and retail channels — with demand in these channels now nearly back to pre-pandemic levels — and this thirst for dairy imports has helped keep farmgate milk prices on a higher trajectory journey for many farmers around the world.”

The report says dairy prices have been further assisted by modest supply growth across the major export regions during the first half of the year.

“The recent European spring flush has largely been lackluster, and while milk flows in New Zealand, the US and South America have been more positive, the recent spike in some feed prices is a further factor which has constrained global milk production growth,” Ms Higgins said.


RaboResearch Senior Dairy Analyst Emma Higgins

“China’s milk production growth continues to push ahead and there is now an increasing risk that this growth will outpace consumption growth, adding further pressure on inventory levels. This, in turn, could change China’s buying pattern and have negative implications for dairy commodity prices,” she said.

“We do anticipate weaker demand from China will have an impact on commodity prices over the course of the season, however, we expect the timing of the softer demand will be past New Zealand’s production and sales peak.”

The report says ongoing global shipping issues and further waves of new Covid-19 variants have the potential to disrupt global dairy markets and shape as additional watch factors in the second half of 2021.

New Zealand

“We expect to see feed prices remain firm well into 2022 and, as a result, we anticipate milk supply growth for the ‘Big 7’ dairy exporters (the US, the EU, New Zealand, Australia, Uruguay, Brazil and Argentina) to expand by just 1.3 per cent in the second half of 2021.”

Ms Higgins said the tail end of the 2020/21 New Zealand dairy season produced exceptionally-strong milk flows.

“Milk flows for April jumped double digits on the same month last year— a first since 2014 — with good profitability and generally favourable weather supporting milk production,” she said.

“National season-to-date production has lifted by 2.7 per cent on a tonnage basis as of April and we have now revised upwards our production forecast for the 2020/21 season from two per cent to three per cent growth.”

The report says the new season kicked off on June 1 amongst generally positive settings for farmers.

“In most regions, farmers have adequate feed reserves heading into winter with cows in good condition,” Ms Higgins said.

“Dairy farmers in the parts of Canterbury worst hit by last month’s flooding are an exception to this, with many now in recovery mode after suffering stock and feed losses as well as damage to farm infrastructure.”


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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David Johnston
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Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153

Denise Shaw
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Rabobank Australia & New Zealand 
Phone: +612 8115 2744 or +61 2 439 603 525