Agrobusiness expert, the Rabobank released at the end of last year, a study on the prospects for the dairy sector in 2021. According to the publication, the global perspective for the dairy sector is optimistic, thanks to the strong prices of commodities, expected economic growth in many regions, and improved consumer sentiment influenced, among others, by the advance of vaccines against covid-19.

On the other hand, world growth in milk production is expected to moderate in 2021, after strong growth in 2020, with an estimated growth of about 2.7 billion liters of milk equivalent compared to 4.5 billion liters in 2020.

According to Rabobank, the growth in milk production among the seven major global dairy exporters (New Zealand, Brazil, Argentina, Uruguay, EU, USA, and Australia) surprised in 2020, reaching the highest level since 2017, but the growth of supply is now expected to slow down in all exporting regions.

The study also points out that the European Union and South America are expected to experience the biggest slowdowns in the coming year, with production in Oceania expected to remain stable.

Chinese imports

As disclosed by the Milkpoint portal, the report indicates that Chinese dairy imports are expected to decline in 2021, with milk production in China projected to increase by about 6% at the beginning of the year and 6.5% in the second half of 2021.

“This is largely based on the short-term boost from Oceania's strong heifer exports to China. However, long-term production growth will depend on continued investments in the dairy sector based on greater profitability”, states the publication.

High milk production and moderate demand growth suggest weaker imports of dairy products in 2021, and higher domestic stocks in China may also limit trade.

Market challenges

The economic recovery and the impact of less government intervention will determine the strength of global dairy demand by the beginning of 2021 - with governments around the world inevitably having to reduce dairy purchases as well as cash payments to support consumers, said the report.

Also, the impacts of the second wave of covid-19 and the lockdown in Europe and the US could have a significant effect on the demand for food services in the first quarter of 2021, if they are extended. However, retail sales are expected to strengthen further as more meals are consumed at home.

The report also warned that La Niña in the southern hemisphere - while bringing the potential to strengthen the Australian season - is already causing drought in southern Brazil and Argentina, and the severity of the event could impact dairy production.

By Milkpoint.