In December 2022, Rabobank analysts expected milk production growth to continue into early 2023 while high farm-input costs and softer demand put pressure on dairy farmers’ margins. That forecast described an uneven market—not falling prices for every dairy product or region—and it was a prediction for 2023, not current market guidance.
What did analysts mean by a “weak global dairy market”?
Successful Farming’s December 9, 2022, summary of Rabobank’s Q4 2022 Global Dairy Quarterly outlook described risks to farm margins as supply grew and production costs remained high. The outlook did not say that every milk price, region, or dairy product would move in the same direction. Farmgate prices, retail prices, supply, and consumer demand varied across markets and products.
The distinction matters: a farmer’s milk price is not the same as the supermarket price of butter or cheese. Product mix, inventories, trade, and the value consumers place on dairy all affect how broader market pressure reaches a particular farm.
Why were farm margins expected to come under pressure?
Milk supply was growing
The article reported that U.S. milk production in the cited fourth-quarter period was 18.50 billion pounds, up 1.2% year over year, and that production per cow was 2,001 pounds, less than 1% above 2021. Those figures were attributed to USDA by Successful Farming. The article also described production growth in Canada and Europe and said the recent supply momentum was expected to continue into the first quarter of 2023.
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High input costs threatened the gap between revenue and expenses
Growing milk output could weigh on farmgate prices, while high input costs made it harder for farmers to preserve margins. The outlook therefore raised a risk to profitability even without predicting that every farmer would face the same costs or receive the same milk price.
Why did China matter to the demand outlook?
At the end of 2022, the article said Chinese buyers were working through accumulated stocks of cheese, butter, and cream cheese. It also pointed to New Zealand’s zero-tariff milk-powder quota under its free trade agreement with China as a factor that could influence when buyers imported product. The outlook anticipated that first-quarter 2023 imports might be below the previous year, with buying interest potentially returning in the second quarter.
Those were forecasts made before the year began, not a record of what China ultimately imported. The article also identified uncertainty around China’s then-slow relaxation of zero-COVID measures. Together, inventory, trade terms, and policy made China’s purchasing pattern a significant uncertainty for exporters and dairy prices.
How did demand differ by consumer and product?
The outlook summary described inflation as a pressure on household budgets and dairy demand. It said U.S. consumers bought less butter than usual during the early holiday period because of its price, while European consumers faced greater retail pressure. Southeast Asian demand was described as resilient, though consumers were buying smaller volumes.
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These accounts point to an important distinction: demand can hold up in one region while consumers elsewhere trade down or buy less. It can also vary by product. A broad claim that “dairy demand” was simply strong or weak would obscure those differences.
What did U.S. dairy trade show?
Successful Farming’s summary reported different results by product and period. Cheese exports were up year over year but their growth slowed, while exports of nonfat dry milk and skim milk powder and of dry whey were down in the periods cited.
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| Product or measure | Reported change | Period and context |
|---|---|---|
| Cheese exports | Up 17% year over year in the first quarter; up nearly 4.2% in the third quarter | The article said rising prices slowed growth by the third quarter. It reported third-quarter trade increases of 17% with Mexico and 10% with South Korea. |
| Nonfat dry milk and skim milk powder exports | About 620,380 tons, down 9% year over year | As reported in Successful Farming’s 2022 summary; the underlying data release was not independently reviewed here. |
| Dry whey exports | About 163,280 metric tons on average through the third quarter into the fourth, down 6% | The article also reported dry whey sales to China down 30% and China accounting for about 45% of U.S. dry whey exports. |
Because the figures cover different products and periods, they should not be combined into a single export trend. The article also reported that U.S. domestic demand for milk solids rose 1% and exports rose 6.2%, while the U.S. consumer price index was up 16% year over year in the third quarter. These were figures in the article’s 2022 summary, not current indicators.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What did the outlook say about U.S. milk classes?
The article expected Class IV milk to maintain a modest premium over Class III during 2023. It associated the expected Class IV support with butter prices and said ample cheese and dry-whey stocks could limit Class III. However, the article’s printed price forecast wording and apparent units are difficult to reconcile. Its precise Class III and Class IV predictions should not be treated as verified values without checking the original Rabobank report or contemporaneous official price series.
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Could government purchases support dairy markets?
Successful Farming reported that analysts anticipated further U.S. government dairy purchases in 2023, which they thought could support fluid milk, cheese, and butter markets. The article said USDA might use about $1 billion for food-bank purchases, with additional amounts for local sourcing and educational meal programs. This was an expectation reported in 2022, not confirmation that those purchases occurred.
Quick Recap
What should a reader take from the 2023 forecast?
- The forecast was published in December 2022 and concerned expected conditions in 2023; it should not be read as a description of the dairy market in 2026.
- Analysts saw continued milk-supply growth and high input costs as potential sources of pressure on farm margins.
- China’s import timing and New Zealand’s milk-powder quota were uncertainties in the demand outlook.
- U.S. trade performance differed by product: cheese exports were still growing in the periods cited, while nonfat dry milk/skim milk powder and dry whey exports were down.
- The expected Class IV premium over Class III was directional; the article’s exact price values are not sufficiently clear to repeat as precise forecasts.
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