The global dairy market appears to be heading for a period of renewed supply scarcity in the coming 12 months, according to Rabobank. Rabobank senior dairy analyst Michael Harvey says the impetus for the tightening global market emanates largely from the supply side, where low milk prices, extreme feed costs and pockets of unfavorable weather are slowing growth in milk production across key export regions.
“We fear that much of the market has been lulled into a false sense of security by the phenomenal growth seasons we saw late in 2011 and early 2012, and the next 12 months may provide a rude awakening,” says Harvey.“The slowdown in milk production growth in export regions will be sufficient to undershoot even the modest growth in consumption that we expect in advanced economies – particularly in the EU and U.S.”
Harvey says this will reduce the exportable surplus available from the "Big Seven" export regions of the world (EU, U.S., New Zealand, Australia, Argentina and Brazil) in the closing months of 2012 and the first half of 2013 – the first such reductions in more than four years.“With little excess inventory in the market, the equation then becomes simple – any increase in import demand from deficit regions will create supply shortages, with the extent of the shortage fuelling an appetite for imports,” he says.
"Factoring in a modest planned increase in imports over the next 12 months from key buying regions, Rabobank expects prices to rise substantially in the international market in order to bring about the demand rationing needed to balance the market.” PD
—From Rabobank news release
