World Dairy Supply and Demand Situation In the Next Ten Years
Source: ADE WeChat Official Account
Recently, the OECD-FAO Agricultural Outlook Report 2019-2028 was officially released. Based on the AGLINK-COSIMO model, the Report has made ten years’ prediction about the production, consumption, price, trade development of more than twenty major agricultural products in more than fifty countries and regions.
In 2018, the increase of herd population and higher milk yields per cow boosted the production of global fresh milk.
Fresh milk production increased by 3.2% in 2018, while that of the EU and the US also grew by 0.8% and 1.1% respectively.
The growth rate of fresh milk production in the EU will be lower than the world average. Based on the small growth in demand for cheese, butter, cream in the EU, and the global demand growth of dairy products, the EU’s production of fresh milk is expected to grow at 1.1% p.a. in 2019-2028, driven by higher milk yields per cow. In the EU, especially Austria, Sweden, Latvia, Greece and Denmark, more than 10% of the dairy cows will produce organic milk, accounting for more than 3% of the fresh milk production.
The number of herds in Africa will also increase. In addition to milk production, these herds also serve as work cattle, beef cattle, or meat sheep. Fresh milk from goats and sheep will occupy a considerable portion. At the end of the ten years, the number of herds in Africa will reach more than one-third of the world's total, and milk production will account for around 5% of the world.
Dairy Processing: Global Processing Amount of Butter Is Growing Rapidly
In the coming ten years, more than 70% of the world's fresh milk will be made into fresh liquid milk, such as milk and yogurt. Less than 30% of fresh milk will be further processed into butter, cheese, skimmed milk powder, whole milk powder, and whey powder.
With a large trade volume, skimmed milk powder and whole milk powder are mainly used in the food processing sector, such as candy, infant formula and baking. In the next ten years, the average annual growth rate of them will be 1.3% and 1.2% respectively.
Consumption: World Milk Consumption Will Grow Faster Than the Past Ten Years
In the next ten years, the proportion of milk in global dairy products consumption will increase driven by income and population growth in developing countries. It is expected that global per capital consumption of fresh dairy products will grow at 1.0% p.a., slightly higher than the past ten years.
The consumption situation of dairy products around the world shows a great difference. In addition to the connection with per capital income, it is also affected significantly by regional consumption preferences. Therefore, the per capital consumption of India and Pakistan is significantly higher than that of China.
Trade: China Remains the Main Importer of Dairy Products
New Zealand, the EU, the US, and Australia are still the leading exporters of dairy products in the next ten years. It is estimated that by 2028, the export volume of cheese, whole milk powder, butter and skimmed milk powder of the four major exporting countries or regions will account for 75%, 78%, 79% and 81% of the world respectively.
The EU is still the world's leading cheese exporter. Its share of global cheese production will reach around 48% in 2028. Pushed by the Comprehensive Economic and Trade Agreement, and the bilateral trade agreement with Japan, the EU will increase its export to Canada and Japan.
In the next ten years, the Middle East and North Africa, Southeast Asia and China will be the main dairy importing countries and regions. Among them, most dairy imports of the Middle East and North Africa come from the EU, while the United States and Oceania will be the main suppliers of milk powder in Southeast Asia.
China will continue to be the world's leading importer of dairy products. In recent years, China's imports of butter and skimmed milk powder from the EU is gradually increasing, but most of its dairy imports still come from Oceania. Meanwhile, China is also a major importer of fresh dairy products. Imports in the base period were 700,000 tons, and it is expected to grow at 2.7% p.a. from 2019 to 2028.
Price: The Price of Skimmed Milk Powder Will Rise
Since 2015, the price of butter has risen considerably more than skimmed milk powder due to the strong demand for milk fat in the international market. After reaching an all-time high in 2017, the price began to decline, and it is expected to drop slightly in the next ten years.
The sustained release of EU intervention stocks in recent years stopped the price of skimmed milk powder from rising, but the continuous release of intervention stocks in 2018 and 2019 will keep the stocks at low levels in the future. For this reason, the price of skimmed milk powder will increase from the current low levels, and the price of whole milk powder and cheese worldwide is expected to change as the price change of butter and skimmed milk powder.