Good news for dairy farmers as Rabobank has increased its farmgate milk price forecast by 65 cents to $7.00 kg/MS for the 2020/21 season.
The increase was due to global dairy demand holding up strongly over recent months and positive consumer sentiment building in key dairy markets, Rabobank dairy analyst Emma Higgins said.
However, Higgins put the news in a more festive way on The Country today, possibly because the lift in the milk price had finally freed her from Jamie Mackay's "Grinch" nickname.
"The Christmas Grinch has come good. It's a Christmas miracle - we're now forecasting $7 for this current season," she said.
In its latest Dairy Quarterly Report – Tepid Supply Growth Awaits a Booster Shot for Demand, Rabobank said global commodity prices remained elevated after rallies during the second and third quarters of 2020.
"Import demand continues to be firm in Asian markets that have successfully controlled Covid-19, and this has contributed to dairy prices staying high throughout our seasonal production peak," Higgins, who co-write the report said in statement.
The European Private Storage Aid programme had whittle down cheese and skim milk powder stocks in the month of October, and these lower European inventories - as well as stock drawdown in the US - were another positive for dairy demand and commodity prices moving forward, Higgins said in her report.
The report was also optimistic about the outlook for global dairy in 2021, Higgins said.
"Several factors in 2021 aid positive consumer sentiment in key dairy markets. These include the advanced state of several Covid-19 vaccines, less political uncertainty after the US election, a weaker US dollar that aids commodity prices and projections for economic growth in most regions."
However, it was important to note that there were also a few clouds on the horizon.
"While there is optimism regarding Covid-19 vaccines, the pandemic is far from over and
we're currently seeing Covid-19 cases rising in Europe, the US and South America. This is
resulting in increased foodservice restrictions in these countries which will slow the recovery in this sector," she said.
"The impact of less government support - which has been a key reason for strong demand and healthy trade during the pandemic - could also be significant in the first half of 2021."
Listen to Jamie Mackay interview Emma Higgins on The Country below:
"With government subsidies expected to be lower in the year ahead, this could limit demand growth and impact global prices if the economic recovery does not materialise."
Higgins said a Chinese supply/demand imbalance was a further factor that had the
potential to deflate market optimism.
"Rabobank estimates Chinese 2021 milk production will grow by six per cent compared to
2020, slightly outpacing demand growth. And as a result, Chinese imports could reduce from this year's lofty levels, and limit gains in dairy product prices," she said.