According to Rabobank, milk prices will remain high due to strong demand and declining milk supply. Rabobank expects milk prices to continue to rise until the end of this year and the beginning of 2022. But high costs are squeezing profit margins.
Milk production worldwide is declining more than previously expected. Milk supply in the main export regions stopped rising in the third quarter of this year. This is the first time after nine quarters of growth. For the fourth quarter, milk production is even expected to decline by almost 0.5%. This is stated by Rabobank in its updated version of the fourth quarter dairy report.
In the USA, the number of dairy cows has fallen by 100,000 since June. This is mainly due to the continued poor margin caused by the sharp increase in feed costs and uncertain availability. Poor weather in New Zealand in the important production month of October is also putting pressure on milk production. At the same time, Fonterra is currently paying out record prices. This gives dairy farmers there room to pay off debts, automate and prepare for stricter environmental regulations.
In the EU and the UK, milk production fell by 0.2% overall in the third quarter. In the Netherlands it was almost 3% less, and in Germany milk production fell by 1.8%. Italy and Ireland recorded increases of 3.4% and 0.3% respectively.
A modest recovery (around 0.4%) in milk production is expected in the first quarter of 2022. In early 2022, demand for dairy products in the EU and the UK may weaken somewhat. Due to the stricter Corona measures, there is again a shift from catering to retail and the internet.
