Spot milk prices are anticipated to continue rising in the coming months as the global dairy market faces significant challenges in supply.
The combination of high temperatures, the spread of bluetongue disease, and a reduced dairy herd has created a perfect storm, leading to significant milk shortages. According to Vesper’s AI-driven price forecast, these factors are expected to keep milk prices elevated for several more weeks, putting increased pressure on both producers and consumers. The graph below illustrates this trend, highlighting the predicted continuation of high milk prices into early 2025.
As the summer holidays come to an end, buyers have returned to the market in full force, seeking to secure the final deals of 2024. Demand is high across the board, with buyers from the Global Dairy Trade (GDT) platform, Algeria, and other regions scrambling to purchase butterfat and other liquid dairy products like cream and raw milk. This surge in demand is further driving up prices, particularly as the market braces for potential shortages in the coming months.
Looking ahead to the fourth quarter, there is uncertainty about the supply side. The continued increase in milk prices is expected to raise production costs for products such as skimmed milk powder (SMP). Unless the profitability of dairy products, such as butter, remains strong, this could lead to a reduction in production.
However, there are concerns that these high milk prices may ultimately lead to a decrease in consumption. While demand remains robust for now, the elevated costs could force consumers to cut back on dairy products, potentially dampening overall demand in the longer term.
Tip: If you’re interested in learning more about how Vesper’s price forecasts are created, feel free to schedule a short call with one of our commodity experts.
