Rabobank sheds light on China but little optimism for 2016

Published 5 April 16

In its first quarterly report of the year, Rabobank has stated it expects the current cycle of low prices to be maintained through most of 2016. Upward pressure is predicted to begin in the build-up to 2017 as stock build-up slows and excess stocks are depleted.

Most regions have seen milk production fall or at least experienced a slowdown in growth, towards the end of 2015/beginning of 2016. However, since the end of quotas, the EU has seen a tremendous increase amounting to around 4bn litres (up 3.4% on the same period in the previous year). A weak Euro facilitating strong export growth is suggested as part of the reason for the continued increase in production. Signs suggest EU production will not falter but perhaps moderate, keeping the pressure on markets.

However, developments in China have given some hope of an increase in import demand over the coming year. Consumption is forecasted to remain stable but lower than expected milk production for 2015 has caused forecasts to be revised. The drop in domestically available supplies, along with high domestic farmgate and wholesale prices, could see China’s stocks begin to reduce. If this is the case, then the country’s import demand may grow through the year, helping to support global dairy prices.