In its Quarter Three report, Rabobank said global milk supply was falling faster than expecte.
Export surpluses were expected to fall by more than 3.4 million tonnes, in the second half of 2016, to mark the biggest supply contraction since the global financial crisis.
But Rabobank senior dairy analyst Michael Harvey said there were still headwinds ahead for the global dairy sector, with continued weak global demand and a significant overhang of stocks.
Mr Harvey said a further drop in exportable supplies was expected in 2017 – in the vicinity of 2.5 million tonnes – largely on the back of slowing production in the EU, but also reduced output in Australia, New Zealand, Argentina and Brazil.
“In Europe, farmers have cut production in response to low milk prices, however poor weather conditions have exacerbated the tightening of supply,” he said.
“And we could see production fall further, depending on the uptake by European farmers to government subsidies, which could theoretically remove around one billion litres from the market.”
Source: Stock and Land