Rabobank: Dairy Trade to Grow at Slower Rate
As production continues to expand, the U.S. dairy industry will rely even more heavily on export markets to soak up excess supply. While exports continue to rise, a recent Rabobank report suggests that dairy trade winds may slow down in the short term.
The Rabobank report shows that over the next three years growth in dairy trade will decrease slightly due to several factors:
- A Russian trade embargo that will be in effect until 2017. The uncertainty around the Trump administration approach to relations with Russia have clouded the future of ongoing trade opportunities.
- Slowing demand growth from China. The report states that China is still defining its equilibrium, which will more than likely mean more focus on quality over quantity.
- The strong U.S. dollar and healthy domestic demand will impair the ability for the U.S. to be competitive among world prices.
- Low oil prices that hamper demand from oil producing countries. Oil prices are expected to remain around $50 per barrel.
The Rabobank report states that, luckily, this comes at a time when export volumes from other nations are in check. All other major dairy exporting countries have dropped in production and will remain constrained. New Zealand expansion will be limited by land availability. Supply from Europe has been constrained by incentives to limit production in light of quota removals.
As the report indicates, uncertainty will remain the norm especially as the new Trump administration weighs the future of pending trade agreements.