Q1 2023 Milk Value Portal Dairy Market Insights now available

The Q1 2023 Dairy Market Insights report (March 2023) is now available on the Milk Value Portal (MVP), examining in detail the macroeconomic and geopolitical variables impacting the dairy market in the short to medium term.

Key international insights:

  • Short-term global dairy market fundamentals remain weak but are expected to improve as milk production slows and trade recovers.
  • The EU is critical to the outlook with milk growth there continuing but domestic demand buckling under the pressure of inflation and increasing interest rates. This is resulting in more European milk being exported in the short-term. The EU continues to be the largest market dampener at present, sending signals that prolong weak commodity prices.
  • China’s demand revival has been slower than had been hoped and the timing and strength of a revival remains highly uncertain.

Key Australian insights:

  • Raw milk production will remain in decline over the remainder of the season – and whilst the contraction in the coming months may not be as pronounced as it was in the second half of 2022 – it is forecast to fall 6% for the full FY2023 season, taking production slightly below 8bn litres.
  • This downward trend in national raw milk production is forecast to continue in FY2024, falling a further 3-4% to 7.8bn litres.
  • As noted previously in the Q42022 MVP market insights report, Australian wholesale prices remain significantly disconnected from Oceania spot prices due to critical local supply shortages and the sourcing strategies of major retailers. The spot commodity milk value (CMV) at the end of March was $7.12kgMS versus the Australian wholesale CMV of $8.30kgMS.
  • Moves by the major retailers are maintaining local wholesale product prices above international benchmarks, at least for the time being.
  • The Australian dollar weakened over the March quarter and stood at US$0.69 compared to US$0.67 at the end of March.
  • Inflation continues to be a key concern for the Australian economy, impacting consumer confidence and prompting further interest rate rises from the Reserve Bank – with continued trading down by consumers placing ongoing pressure on processor margins despite the pass-through of some price increases.
  • Supply security remains paramount for dairy companies. However, there is likely to be slightly less intense competition for milk in 2023/24 as large processors appear to have secured sufficient supplies and potentially a greater spread of farmgate milk prices given the pressure on processor margins.
  • Production costs will continue to increase in the coming season, without a material improvement in access to farm labour.

To access the latest Dairy Market Insights report, please visit the Milk Value Portal by clicking here: https://rb.gy/g60rm

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