Predictions of slowdown in dairy markets by Rabobank have been challenged by the Irish farm organisations.

Rabobank has warned in its latest report on the sector that the current dairy market strength is not sustainable.

The bank is not forecasting a collapse in dairy commodity prices, but an easing of values as part of what it describes as a natural correction.

“We anticipate downside risks emerging in the second half of the year, driven by expanding supply and demand uncertainty,” said Mary Ledman, global dairy strategist at RaboResearch, the research arm of the bank.

“However, rather than a sharp downturn, we expect a recalibration from recent multi-year highs – a natural correction following a period of strong performance,” she added.

But the Irish farm organisations have questioned this analysis.

ICMSA dairy chair Noel Murphy maintained that the current supply/demand dynamic was in a positive place, and he claimed the decision by Lakeland Dairies to increase the May milk price showed that markets are better than some people expected.

Pointless

The ICMSA representative claimed that predicting milk prices beyond three months was “almost pointless” given the impact of variables such as weather, animal health and the volatile geopolitical situation.

IFA dairy chair, Martin McElearney, expressed confidence that milk prices will hold given the strength of market projections.

“We are seeing strong markets into next year,” he said.

However, Ledman maintained that consumer sentiment had waned amid weak and uncertain global economic conditions.

“A number of factors are weighing on the demand outlook. These include: near-record-low consumer confidence in the US, troubling indicators of economic struggles in China and declining sales data from restaurants and consumer packaged goods companies across many regions,” the analyst stated.

“Dairy companies and downstream multinational consumer packaged goods companies will find it challenging to pass on higher dairy costs to consumers still grappling with post-COVID-19 inflation,” said Ledman.

Ongoing trade tensions and tariff volatility were identified by Ledman as further key risks to the trade in dairy commodities.

“Global trade conflicts remain elevated, with volatility and rapidly changing tariffs emerging weekly. These factors are influencing global dairy trade flows,” she said.

Milk production grew by just 0.5% year-on-year across the main exporting regions in quarter one, the RaboResearch report noted.

However, production growth is forecast to accelerate to 1.1% in the second quarter and 1.4% in the third quarter – the strongest quarterly increase since early 2021 – driven by growth in the US, EU, and South America.

RaboResearch forecasts that milk production from the main milk producing regions in 2025 will grow to 326.7m metric tonnes, an increase of 1% year-on-year or 3.2m metric tonnes. This is the highest annual volume gain since 2020.