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Rabobank warns of oversupply milk

24 November 2020 - Wouter Baan - 5 comments

Rabobank expects the negative impact of the corona crisis to keep a grip on the dairy market for the time being. Until the second quarter of 2021, analysts at the bank see no room for recovery.

A new balance between supply and demand will have to be created on the dairy market. That is now missing. Due to the lockdowns in many countries, demand has fallen considerably, Arla, among others, mentioned this last week with an explanation on the milk price for Dec.

After a sharp drop during the first wave this spring, milk prices have recovered in many production regions. This is the case in the Netherlands, but also in neighboring European countries. Milk prices are also not bad in New Zealand and the United States. That is why Rabobank expects that the growing milk production will continue next year, a trend that has been visible in many regions for some time now.

Old normal still far away 
Rabobank also expects government measures to help dairy farmers and dairy processors during the corona crisis to fade into the background in 2021. The demand for dairy products will also need time to recover. All the more so because the 'old normal' is still a long way off and the purchasing power of consumers is being affected by the economic downturn caused by corona in many countries.

All of these factors mean that demand is likely to remain weak while supply is increasing. If milk production continues to rise, there is even a threat of global oversupply. Sentiment in the dairy market will remain weak at least until the second quarter of next year, Rabobank forecasts.

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Wouter Job

Wouter Baan is Head of Meat & Dairy at BoerenbusinessAt DCA Market Intelligence, he focuses on dairy, pork, and meat markets. He also monitors (business) developments within agribusiness and interviews CEOs and policymakers.
Comments
5 comments
Subscriber
mt 24 November 2020
This is in response to it Boerenbusiness article:
[url = https: // www.boerenbusiness.nl/melk/ artikel/10890151/rabobank-warns-voor-overaanbod-melk]Rabobank warns against oversupply of milk [/url]

And thank you again, that's what you get up for every morning at half past four!!

Also on the weekend gentlemen! Weak talk for the trade again, because they are still running fine... THANK YOU again
Subscriber
Jan 24 November 2020
When the bank says something, the opposite usually happens
Subscriber
mt 24 November 2020

Correct!! The skyrocketing feed prices don't matter??

Everything comes together in the yard... and it can't get out!! Where is the complete story instead of that selective talk
cow 24 November 2020
I thought the dairy was responsible for the marketing of our milk. That is always the added value they claim to deliver.
As farmers we are stimulated to supply a constant and predictable flow of high-quality product (that is the added value that the farmer provides) and now sales are stalling at our buyer and now they are dumping the costs back on the farmer.
Evert 24 November 2020
Yes, we all want to export so much, we export 70-75% of the milk or pork. We falsely tell ourselves that we are rocket scientists because we make a product that no one else can. While the knowledge and skills are easier to export than the product itself. We are stupid enough to fill in the production of a discontinuing company as soon as possible.

You see it in dairy farming, as dairy farmers we laughed at those 'stupid' intensive farmers, with high manure disposal costs and low prices for the product. Now we are in the same boat. Dairy farmers who have to compete with pig farmers for the sale of manure and who have to pay a heavy price for the sale of manure. The dairy is fine with it, a cheap supply of milk in abundance.

For each new vision of the future, the dairy comes with the phrase; "The number of companies is shrinking but production remains the same". As long as this continues we won't earn anything. The economies of scale of economies of scale outweigh the economies of scale. And then I see people talking about limiting production in a European context. I think Europe will then come to the conclusion: let the countries with the highest degree of self-sufficiency and the highest 'pressure on the environment and environment' limit production. We are also a bit childish, when we profit from the export through sky-high prices, milk powder for China or swine fever in China, 'then it will never be bad again' and now that we experience the disadvantages, we as a collective (within Europe) have to go less produce.

We are rushed by the account managers and advisors of the associated companies to keep the total livestock/production level so that they can keep their jobs, while this is against the natural workings of the 'pig' cycle. The related companies know that in the event of calamities the farmer bears the costs, the risk for the entire chain lies with the farmer.
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