The current lift in dairy-farmer margins will continue into 2025 as global demand for milk powders, butter and other commodities strengthen, Rabobank has predicted.

In a positive analysis for the sector, the Dutch bank has also forecast increased global supplies and more bite among Chinese buyers of dairy commodities.

“Firmer commodity prices have flowed through to dairy farmers in export regions, with local farmgate prices improving considerably in the second half of 2024,” said Michael Harvey, senior dairy analyst at RaboResearch.

“In parts of Europe and New Zealand, farmgate milk prices are nearing 2022 record highs. Rising milk prices and affordable feed have improved dairy farm margins, which will likely expand further in 2025,” he predicted.

RaboResearch expects 0.5% milk supply growth from the main export regions in the second half of 2024, driven by significant seasonal peaks in Australia and New Zealand. Milk supply growth of 0.8% is forecast for 2025.

“Affordable feed costs and improved weather are supporting milk supply growth,” Harvey explained.

There was also good news on China.

“We expect China’s three-year run of declining net import volumes to end in 2025, with imports improving by 2% year-on-year,” Harvey maintained.

“This is led by lower supply and optimism for a recovery in consumer demand," he added.

While the Rabobank analyst stressed that global dairy fundamentals remained "mostly balanced moving into 2025", he identified poor consumer sentiment and the election of Donald Trump as real concerns for the year ahead.

“Consumers are eating at home more, supporting retail, but there are continuing signs of trading down and some reductions in purchases, particularly in emerging markets. A meaningful lift in incomes and consumer confidence are required to spur dairy demand to more normal settings,” he said.

On Trump, Harvey's worries related primarily to the potential for trade wars.

“With the election of Donald Trump, markets are watching for the risk of rising US protectionism and potential trade tensions. A re-emergence of tariffs could disrupt dairy trade flows, while the threat of mass deportations could disrupt US farm labour availability,” Harvey explained.