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Rabobank Dairy Quarterly Q1 2019: Rising risks

Fuseworks Media
Fuseworks Media

Milk supply growth from the Big 7 regions has "screeched to a standstill", according to Rabobank's latest global Dairy Quarterly report.

Lifting by just 0.1 per cent year-on-year in Q4 2018, milk supply for the Big 7 (the US, the EU, New Zealand, Australia, Brazil, Argentina and Uruguay) is expected to remain tight across the forecast period to 2020 - with particular pressure to be felt in the first half of 2019, as milk production dips into negative territory for the first time since 2016.

Farmgate milk prices are currently unable to mitigate expensive inputs, the report says, with margin squeeze resulting in tumbling collections in Australia, European supplies trailing behind year-on-year and US growth below historic averages. Weather challenges in Argentina and New Zealand are also starting to bite and will add to supply pressure over the coming months.

In the short-term, this will support further upside for global prices.

However, the report warns, demand outlook uncertainty remains heightened. With clear downside risks squarely focused on the affordability of dairy in an environment of weaker economic growth and rising retail prices.

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