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Price gains expected, but margin pressures remain for dairy farmers across the globe – Rabobank Dairy Quarterly report

There are bright spots on the horizon for improved global dairy prices, but farmers around the world are not awash in profitability as margin challenges persist into the new year, according to a new report by food and agri banking specialist Rabobank.

In its Q1 2024 Global Dairy Quarterly: Finding a new equilibrium, Rabobank says dairy product price forecasts in most key regions indicate a better year following a challenging 2023, with improved margins sorely needed at the farmgate level.

“Milk supply growth continues to struggle, with the second half of 2023 seeing weaker year-over-year production from the key exporting regions,” report co-author, Rabobank senior agricultural analyst Emma Higgins said.

“A return to production expansion will take time though, and we forecast lower year-over-year output for the first two quarters of this year before volume turns positive into the second half of 2024, partially helped by easier-to-overcome comparable data points.”

Emma Higgins, Senior Agricultural Analyst

Senior Agricultural Analyst. Emma Higgins

After two consecutive quarters of weaker supply, the report says, a firmly bullish price response would generally materialise, similar to the output pullback in 2021 followed by, in some cases, record high prices into 2022.

“But the supply and demand balance is different this time,” Ms Higgins said, “with lower milk production relatively neutralised by sluggish global demand in recent months.”

Looking ahead, Ms Higgins said, there is increasing evidence that dairy demand is on the upswing.

“The recessionary fears prevalent among many countries throughout 2023 have largely passed and, while last week’s Global Dairy Trade auction did produce a weaker overall result, this followed six consecutive events with positive price movements,” she said.

“We’ve also seen positive developments in China with retail and food service sales showing strength through the Lunar New Year.

“Slowing milk production growth in China means we expect imports to improve in 2024, even if they remain lower than the long-term average.”

Ms Higgins said the bank’s expectation is that slow but steady dairy commodity price gains will materialise this year.

“And accordingly, we’ve now made a small upwards revision to our New Zealand milk price forecast for the 2023/24 season, increasing this by five cents to $7.80kg/MS.” 


What to watch



The report identifies several key watch factors for the sector in 2024, including upcoming elections in many key dairy regions.

“European parliament elections are approaching in June while Americans will go to the polls to elect a new president and many members of Congress in November,” Ms Higgins said.

“Any leadership shifts could mean new approaches to policy, including free trade agreements, sustainability policies, or nutrition priorities that trickle back to impact dairy prices.”

Sector participants will also be keeping a close eye on developments in the Dutch and Irish dairy sectors where farmers are facing lower nitrogen derogation limits that will decrease application rates of organic nitrogen from animal manure in the 2024 season and beyond.

“This will reduce carrying capacity per hectare, which could result in farmers re-balancing their herd size and/or higher costs for manure disposal,” Ms Higgins said.

“And it’s not just the Netherlands and Ireland dealing with this challenge, with Denmark's derogation allowance also up for renewal in July 2024.”

Other watch factors identified in the report include geopolitical conflict, weather patterns and feed costs.


New Zealand update


The report says Fonterra’s forecast milk price for the 2023/24 season has improved since the last quarterly, lifting by four per cent from NZD 7.50/kgMS to NZD 7.80/kgMS – a 16 per cent gain on the lowest farmgate forecast announced earlier in the season.

“Despite this, there is some lingering financial pressure due to production issues with summer heat and water availability in some parts,” Ms Higgins said.

“With most farmers having finished their pregnancy testing, there is an opportunity to cull and rebalance feed budgets. Fortunately, above average quantities of supplementary feed harvested in the first half of the season will help going into autumn.”

Ms Higgins said New Zealand milk production has held up much stronger than earlier anticipated.

“On a tonnage basis, a ‘non-traditional El Nino’ has seen milk supply running just 0.5 per cent lower compared to last season for the eight months to January 2024,” she said. “

Yet milk solids collections are higher than the previous year by 0.8 per cent over the same period, driven by a solid South Island performance. We anticipate milk production to decrease by 0.7 per cent on a tonnage basis for the full 2023/24 year. The new 2024/25 season is expected to get off to a better start, simply on the assumption of poor comparables and improved weather. 

The report says export volumes for the three months to January 2024 were up seven per cent (69,000 tonnes) on the prior year.

“This is higher than the rate of milk production over the same period and reflects weaker exports in 2022, along with clearing inventory at cheaper prices,” Ms Higgins said.

“New Zealand exported year-on-year five per cent more product to China over the three months to January 2024 with exports of WMP and SMP jumping over 20 per cent for January 2024 compared to last year.

“Other destinations lifting their appetite for New Zealand dairy over this period included the Middle East (Saudi Arabia and the UAE) and South-East Asia (Malaysia, Thailand and Indonesia).” The report says New Zealand halted exports of heifers and cattle by sea in April 2023, however, this topic appears back up for discussion under the new coalition government. 


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 customized banking and finance solutions to businesses involved in all aspects of food and agribusiness. Rabobank is structured as a cooperative and operates in 38 countries, servicing the needs of about 8.6 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 27 offices throughout New Zealand.

Media contacts:

David Johnston
Marketing & Media Relations Manager
Rabobank New Zealand
Phone: 04 819 2711 or 027 477 8153

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