Rabobank is predicting that while global dairy markets will remain firm into the middle of next year, the second half of the year will be tight in the face of a possible global recession. In its latest quarterly report, the Dutch company said that globally traded dairy products slowed from 18% growth to 8% growth. Despite the slowdown, the dairy market is tighter than previously expected as a result of weakened supply growth.
Rabobank is predicting that while global dairy markets will remain firm into the middle of next year, the second half of the year will be tight in the face of a possible global recession.
In its latest quarterly report, the Dutch company said that globally traded dairy products slowed from 18% growth to 8% growth. Despite the slowdown, the dairy market is tighter than previously expected as a result of weakened supply growth.
Several reasons cited for the weakened supply despite higher farm gate milk prices include the hot summer, particularly in Europe and China, and a reduction in US cow numbers through August after a fall of 82,000 in July.
It also warned that global economic activity is slowing, which is reducing consumer confidence and will impact demand. It highlighted that China posted its weakest year on year GDP growth in 30 years and that Germany saw its economy contract in the last quarter.
With many economists predicting the possibility of a global recession in the second half of 2020, Rabobank noted that typically during recessions, dairy product prices can decline by 20-40%.
Overall, it expects higher milk prices in the second half of 2019 going into 2020 and that this will likely stabilize the herd and boost milk supply by about 1% in the next 12 months, at which point there might be some downside price pressure.
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