March 17, 2022

Worldwide dairy prices remain high while global production declines

A Rabobank report has found that worldwide dairy production will continue to decline by 0.7% year-on-year in the first half of 2022 even though global farmgate milk prices remain high, the UK Agriculture and Horticulture Development Board reported.

This follows a worse than projected end to 2021 for milk production.

The key reasons to declining milk output are increasing costs of inputs, lack of workforce, poor weather, and variable livestock feed quality. The Russian invasion into Ukraine has also contributed to escalating high costs as both countries are major players in the energy and grains markets.

Dairy exports are also projected to slow down this year because of tight supplies, while high prices for milk may result in declining demand from importers. China's lower demand is also due to the country growing their domestic dairy production.

The report said airy commodity prices should remain high because of inflationary pressures and tight supplies. Long-term projections are difficult due to uncertainties around consumer behaviour given higher prices, and market conditions affected by Russia's invasion into Ukraine. It is unlikely that inflationary pressures will relax or milk output will increase until later in 2022.

-      UK Agriculture and Horticulture Development Board