Dairy outlook stable despite global threats
Balanced global milk supplies and relatively stable prices are forecast for the back end of 2018 and across most of 2019, according to the latest Rabobank quarterly review.
However, uncertainty surrounding Brexit, continuing trade tensions between the US and China, and increased milk output in New Zealand are all identified as potential threats to market stability.
Global dairy markets have been helped by stronger Chinese buying in 2018. Imports were up 11pc from January to July compared to 2017, and are forecast to increase 16pc in the second half of the year.
A slowdown in milk supply growth across all the main production regions - apart from New Zealand over the last few months - has also been a feature of 2018, with output increasing by just 1pc in Q2 and into Q3 compared to 2017.
This level of supply growth will be absorbed by increasing global consumption, Rabobank states.
Drought in Europe, and more expensive feed in the US and Argentina, hit milk production in all three regions, Rabobank points out.
"The impact of more expensive feed costs and tighter margins of milk producers globally are now very evident and will continue the squeeze into 2019," the review predicts.
Despite the scorching summer weather, however, European milk production grew 1.6pc to the end of July compared to 2017, and the review is forecasting increased supplies through the final quarter on the back of improved returns and a 1pc lift in demand.