Global dairy Q4 2024 Rabo bank: A period of prosperity

The second half of 2024 marks a turning point for milk supply growth across the Big 7 export regions. Year-over-year production gains are forecast at 0.5%, offsetting the 0.5% YOY decline in 2H 2023. Combined seasonal peaks in Oceania, the largest in over a decade, underpin 2H 2024 gains. Supply growth in the Big 7 will maintain its momentum in 2025, with gains expected in all regions, marking the first time this has happened since 2020. RaboResearch forecasts milk supply growth of 0.8% in 2025.

Farmgate milk prices are trending higher. Across the global feed complex, there are no significant issues for dairy producers, with mostly favorable prices and availability. The combination of rising milk prices and affordable feed mean dairy farm margins have improved and will likely expand further in 2025.

Global dairy demand dynamics remain mixed, with consumer spending still under pressure across many economies. The impact on dairy purchases continues to play out. Foodservice channels remain sluggish in most major markets. Consumers eating at home more is supporting the retail channel, but there are continuing signs of trading down and some reductions in purchases, particularly in emerging markets. In some regions, deflation in dairy aisles, which has increased in 2H 2024, is helping consumers’ budgets. Against this backdrop, dairy supply chains in major markets have been readying themselves for upcoming seasonal and holiday demand.

Global dairy fundamentals remain mostly balanced moving into 2025. There are more milk and dairy products in the pipeline, and dairy demand should also improve in 2025. China has made significant progress in rebalancing stocks. Based on our assumption of normalized trade (excluding proposed tariffs by Trump), we see the current dairy commodity prices supporting improved farm margins through 2025, but without causing major margin compression for food and beverage manufactures (at least not due to the cost of dairy products).