Increasing global milk inventories and higher production led by the European Union will push back an expected rally in prices until next year, according to Rabobank International.
A sustained rebound will be delayed until the first half of 2016, the bank said in a statement. While Rabobank maintains the forecast for a recovery, it has pushed out the time frame by at least three months, it said.
In May, global dairy prices plunged to their lowest since 2009 amid abundant supply, helping cut food costs to the lowest in five years, a United Nations index showed. Output of milk, cheese and butter will rise to records this year, the US Department of Agriculture estimates. European farmers are boosting output after quota curbs ended in April, while supply from New Zealand unexpectedly held up amid dry conditions.
“Global milk production is rising faster than demand growth, and there is simply too much milk in the market,” Rabobank analyst Michael Harvey said in the statement. “This has left exporters looking for additional offshore sales at a time when China and Russia have been largely absent.”
China may reduce purchases of whole-milk powder this year, while imports of non-fat milk powder will grow at a slower rate, according to the USDA. China, which uses milk powder in infant formula, has been a driver of global demand. Russia banned some food imports, including dairy, from the EU last year in response to sanctions related to Ukraine.
Rabobank forecasts an almost 40-per-cent increase in the world whole-milk powder price to $3,450 a metric tonne by the second quarter next year, the report said.
News by Bloomberg, edited by ESM