"The Northern hemisphere experienced a rebound in milk and dairy prices by the end of [the second quarter of 2020]. However, it may be too early to call this a real recovery", writes Ben Lane, milk market analyst at RaboResearch. "Most of the price support was due to government aid, which is likely to decrease in the coming months. The upcoming presidential elections in the US may increase the level of support in the United States", the expert believes.
Global dairy markets are under pressure due to demand problems caused by government decisions on lockdowns in most countries. Getting back to balance in trade can take time, especially in the food sector.
According to Rabobank, as soon as government aid begins to decline, market fundamentals will take their toll and the economy will begin a slow recovery. The build-up of inventories in a number of key exporting countries will put downward pressure on dairy prices in the coming months due to a combination of increased inventory levels and competition.
In addition, Rabobank said that the world's largest market for dairy imports will be practically absent from world trade in the coming months: dairy imports to China are projected to fall by 15% year-on-year in 2020. The weakening of national currencies will also reduce the competitiveness of imports.