Global milk production is expected to remain stable with a slight decline of 0.1% in 2024. Regional variations include growth in Australia and the EU, while declines are forecasted in the UK, New Zealand, and Argentina. Input costs and weaker demand impact overall market dynamics.
Global milk production across key regions is projected to remain stable in the second half of 2024, with only a slight year-on-year decline of 0.1%. This follows a minor increase of 0.1% recorded in 2023, marking a downgrade from the earlier forecasted 0.25% growth for 2024. The overall outlook suggests a more stable but mixed production environment across different regions, with some experiencing growth while others face declines.
First Half of 2024 Overview
In the first half of 2024, milk production saw mixed results across major dairy-producing regions. While Australia and the European Union (EU) reported growth, other regions experienced declines. Australia emerged as a standout performer, with a 3.8% increase in milk supply, largely due to favorable weather conditions and recovery from weaker production levels in 2023. The EU showed modest growth of 0.6%, reflecting the resilience of the region despite challenges such as declining dairy cow herds.
Conversely, the United States, United Kingdom, and New Zealand reported declines in milk production during this period. The US saw a 0.2% decrease, attributed to a slow decline in herd size that is now beginning to stabilize. The UK and New Zealand both experienced a more pronounced decline of 0.7%, with New Zealand facing additional pressure from El Niño-induced drought conditions, particularly affecting feed availability in the North Island.
Regional Insights and Forecasts
- Australia:
Australian milk production is expected to grow by 2.0% for the full year of 2024. The combination of better weather conditions, stabilizing input costs, and improved farmer confidence has been key to this recovery. The outlook for the second half of the year remains positive, with continued growth anticipated. - European Union:
Despite a 0.5% reduction in the dairy cow herd, EU milk production is forecasted to remain stable, with a slight increase of 0.4% expected for the entire year. The region benefits from stabilizing input and output prices, which could improve margins for dairy farmers. Additionally, easing food inflation may help sustain EU dairy consumption at stable levels. - United States:
The US dairy sector is seeing a gradual stabilization in herd size, with milk production projected to close the year with a marginal 0.2% growth. This reflects a slow recovery as the sector adjusts to previous declines and seeks to stabilize both cow numbers and production levels. - United Kingdom and New Zealand:
Both the UK and New Zealand are expected to end the year with a 0.7% decline in milk production. In New Zealand, the El Niño weather pattern has severely impacted feed availability, particularly in the North Island, contributing to this decline. However, improved milk prices and better weather conditions later in the year may mitigate some of these losses. - Argentina:
Argentina continues to experience significant challenges, with a projected decline of 7.4% in milk production for 2024. Economic difficulties have exacerbated the situation, though the expected decline is less severe than in previous years.
Market Dynamics and Global Outlook
The global dairy market in 2024 has been characterized by slight undersupply, driven by weaker underlying market fundamentals. A key factor contributing to this situation is the disappointing import demand from China, which has not shown the expected growth. Despite recent price increases that have provided some margin improvements for dairy producers, input costs remain high, affecting overall profitability.
According to Rabobank, the recovery in global dairy prices is likely to be slower than anticipated. The lack of sustained consumer demand growth in most regions, coupled with increased Chinese domestic production, means that global demand for dairy products will remain subdued. This points to a market that is approaching equilibrium, with neither significant surplus nor shortage expected in the near term.
The second half of 2024 is expected to see global milk supplies remain stable, with some regions experiencing growth while others face declines. The slight undersupply in the market, coupled with high input costs and modest demand, will continue to shape the global dairy industry. As the year progresses, the stability of milk production will depend on factors such as weather conditions, economic stability, and consumer demand, all of which will play a crucial role in determining the future trajectory of the dairy sector.