Domestic demand for dairy products like natural cheese and butter, along with premium dairy products, should rise in the second half of 2018. That prediction comes from Rabobank in its Dairy Quarterly 1 Report.
“The stronger economic growth is projected to come mostly from the recent tax policy change, which translates to stronger dairy demand through increased food service and retail sales,” the report says. The challenge is that dairy product stocks are still high and burdensome. The Rabobank report says nonfat dry milk powder stocks are high at 154,000 tons, which is 50 percent more than last year and the highest number since 2005. Butter stocks are a few percentage points higher than last year and cheese stocks are up seven percent.
Rabobank also notes that U.S. dairy imports are down, following a trend that began last year. The report says Rabobank also expects dairy exports to be more competitive as U.S. prices are below international levels and will be helped by a persistently weak dollar. “The optimistic domestic demand outlook, together with slowing milk production levels, could curb the exportable surplus during the second half of 2018,” the report concludes.