Dairy Starts Slowly in 2024 Due to Low Demand

Rabobank released its first-quarter dairy report for 2024. Lucas Fuess, a senior dairy analyst for Rabo AgriFinance, says he’s cautiously optimistic when describing the U.S. dairy industry.

Fuess says, “We’ve seen seven consecutive months of lower milk production, so we’re a little bit tighter from the supply side of things. The issue we’re seeing is that this weaker supply is being met by weaker demand as well. So lower milk output and less volume are not necessarily creating an overwhelmingly bullish price response like we normally would expect in times of tighter production.”

He says the dairy industry is showing a little bit of price recovery. Fuess says, “I think that because we’re tighter on milk supply domestically, and then we’re also lower on a global basis, end users are aware of this, and we’ve seen very slight price recovery in recent weeks. Our theme in this report and looking ahead toward prices this year is one of slow but steady milk price improvement. I don’t think we’re going back to the, in some cases, record high prices in 2022, but overall, we should see a little bit better margins from a farmer perspective this year than we saw in a challenging 2023.”

Dairy exports backed off in 2023 after a fantastic 2022. He says, “We saw exports, especially to a lot of our key trading partners in Southeast Asia or even up into East Asia or China kind of struggle throughout 2023, not only from purchasing U.S. products, but basically on a global level overall. Granted, that was against a record-high 2022, but the backtracking did negatively impact prices a little bit throughout 2023.”

It’s a good news – bad news situation in dairy according to Fuess.

He says, “Domestically too, it kind of depends on the product overall. We’ve seen pretty strong butter demand, which has kept the butter price firmly elevated of late. But cheese has been more of an issue and, of course, that drives that Class Three milk price that farmers focus on so much. When I look at the cheese market, we have a pretty abundant supply overall. Milk, even though it’s down some in the U.S., will continue to flow to cheese plants first, so there’s no negative impact on cheese production because of this tighter milk supply. But on the demand side, too, when I talk to clients, when I look at some of the data, it’s been a pretty challenging start to the year from a demand perspective.”

Story courtesy of the NAFB News Service