Rabobank Global Dairy Quarterly Q1 2023 report highlights the challenges facing the milk value chain as global milk production remains low and inflation and high feed costs push consumers towards more economical buying habits.

The latest report from Rabobank reveals that participants throughout the milk value chain are facing difficulties, as milk producer prices have fallen from the high levels seen in 2022, while feed costs have reached record highs. High inflation and rising interest rates are also pushing consumers towards more economical purchasing habits.

The US Department of Agriculture’s report on milk production in February 2023 showed an increase in production in January. Production rose by 1.5% compared to January 2022 in the 24 major states, totaling 18.5 billion pounds (8.4 billion kg). Production per cow in the 24 major states averaged 2,069 pounds (939 kg) in January, up 18 pounds (8.2 kg) from January 2022. The number of milk cows on farms in the 24 major states was 8.93 million head, an increase of 51,000 head from January 2022.

It is expected that milk supplies in the EU and the UK will increase by approximately 1.2% in the first quarter of 2023 compared to the same period last year. In Brazil, supply is expected to increase by 1.5% in the first half of 2023, while other regions in South America are likely to see a reduction in production. Milk production in New Zealand is expected to decrease by approximately 1.5% throughout the 2022/23 season, while there is unlikely to be any growth in Australia until at least 2024. China is also expected to join the anticipated production decrease in 2023.

Price uncertainty persists, with overall prices falling by around 5% since the beginning of the year, while whole milk powder prices have dropped by approximately 1%. Global milk prices have largely remained unchanged, with the exception of butter prices, which have strengthened by approximately 3% this year.

Key Milk Markets

Global trade in dairy products performed better than expected in 2022, despite China’s withdrawal. Exports to key importers, including Mexico, India, and Algeria, increased, while sales to China, the Philippines, and Indonesia fell. The report suggests that China’s absence in the global dairy trade may have paved the way for other countries to increase their market share.

In conclusion, the report highlights the challenges facing the milk value chain, including low global milk production, high feed costs, inflation, and the need for consumers to adopt more economical buying habits. While there are some bright spots, such as increased production in the US and butter prices remaining strong, the overall picture is one of price uncertainty and difficulty for the industry.