STRONG commodity prices, forecast economic growth in many regions and improving consumer sentiment are expected to create a positive outlook for the dairy sector in 2021, according to agribusiness specialist Rabobank.
In its latest dairy quarterly report 2020: To new beginnings, the bank says global milk production growth is projected to moderate in 2021 after a strong 2020, with forecast growth of about 2.7 billion litres of milk equivalent, compared to 4.5bL in 2020.
Rabobank dairy analyst Michael Harvey said that the milk production growth across the global Big-7 dairy exporters had surprised in 2020 but supply growth would likely slow across all export regions.
As seasonal production slows in the northern hemisphere, Mr Harvey said demand projections looked to remain stable - and that strengthening retail performance in the wake of COVID would further support commodity prices.
"Commodity prices remain at higher levels after a rally in recent months, and we expect these prices to remain into 2020," he said.
"In Europe and the United States, previous dairy stockpiles are now reaching commercial channels, which is further positive good news for prices."
The report says globally, several factors will positively impact consumer sentiment in key dairy markets in 2021, including the roll out of COVID-19 vaccines, less political uncertainty after the US election and forecast economic growth in most regions.
While milk production has grown in all Australian regions, except Qld, the limited national dairy herd remains a constraint on further growth, with cull cow prices still elevated.
"Culling has slowed more recently, but we've come off an extended period of higher culling during the drought, and rebuilding the herd - and maximum production - will take time," Mr Harvey said.
Rabobank's farmgate milk price forecast has been revised sightly higher at $6.30 a kilogram milk solids for 2020-21, a figure Mr Harvey said was mostly profitable and supportive of milk supply growth.
But there is caution with milk supply growth outpacing domestic dairy demand and Chinese dairy imports expected to decline in 2021.
Start the day with all the big news in agriculture. Sign up here to receive our daily Stock Journal newsletter.
