FAO Food Outlook Nov 2013 - Milk and Milk products
International dairy products prices have declined from their April peak, but still remain at historically high levels. Although milk production continues to increase steadily in many countries, especially in Asia, output in some of the main exporting
countries has been constrained.
World milk production in 2013 is forecast to grow by 1.9 percent to 780 million tonnes – a similar rate to that in previous years. Asia and Latin America and the Caribbean are expected to account for most of the increase, with only limited growth elsewhere.World trade in dairy products is projected to decrease by 0.9 percent in 2013 to 53.0 million tonnes of milk equivalent amid supply limitations. This compares with an annual average increase of 7 percent in the previous four years.
Asia will remain the main market for dairy products, accounting for some 55 percent of world imports, followed by Africa, with 15 percent. Signiﬁcant additional demand is expected from China, the Islamic Republic of Iran, Singapore and Pakistan. Elsewhere in Asia, Saudi Arabia, the United Arab Emirates, Indonesia, Japan, the Philippines, Malaysia, Vietnam and Thailand remain important markets, but their import levels are not expected to change markedly and in some cases may decrease. In Africa, elevated international prices are projected to reduce imports as a whole. The principal importers that may be affected are Nigeria, Libya and South Africa. In Latin America and the Caribbean, a number of signiﬁcant milk powder importing countries, including Venezuela, Cuba, Colombia, Brazil and Peru, may also see purchases constrained by high prices. By contrast, imports by the Russian Federation are anticipated to increase, stimulated by strong demand for butter and SMP.
Remain at high levels
Internationally, dairy product prices have fallen back somewhat from their peak in April, but still remain at elevated levels, substantially above a year earlier. The main contributing factor is the limited availability of produce for export.
With the Index currently hovering around the 250 mark, as New Zealand recovers from the brusque closure of the previous season, dairy prices are anticipated to move lower - in particular for WMP and SMP, which were most affected by the spike in the early months of the year. This latter event illustrates the extent to which the international market is exposed to sudden changes in milk production and availability of milk products, in particular, as publicly ﬁnanced inventories are at minimal levels in the EU and the United States, and almost non-existent elsewhere.
Steady growth in 2013
World milk production in 2013 is forecast to grow by 1.9 percent to 780 million tonnes – a similar rate to in recent years.
Asia is expected to account for most of the increase, with output in India, the world’s largest milk producing country, set to grow by 5.3 million tonnes to 141 million tonnes. Rising disposable incomes and population growth are the two main dynamics behind the increase in India’s production. Expansion in herd size, as well as improved productivity, is an important engine in the expansion. Increased output is also anticipated in China, Pakistan and Turkey, spurred by steady growth in consumer demand. The Republic of Korea is slowly recovering from the 2011 foot-and-mouth disease outbreak which required the slaughter of 8 percent of its dairy herd and led to a corresponding drop in production.
In Africa, a moderate increase in milk output is anticipated for 2013, assisted by generally favourable weather conditions. Expansion in output is anticipated for Algeria, Morocco and Uganda, where government policies in support of dairy development and an expansion of processing capacity have contributed to the increase. For East Africa overall, adequate rainfall this season has promoted pasture growth. For Kenya, outbreaks of foot-and-mouth disease in central and northern parts of the country have had a negative impact on production. In South Africa, a prolonged, mid-year dry spell may result in output falling.
Latin America and the Caribbean
Rising incomes and ﬁrm regional and international demand have favoured dairy production growth in several countries in Latin America and the Caribbean. Additionally, most South American countries have enjoyed good pasture conditions during 2013. Overall, sub-regional milk production is foreseen to expand by 2.9 percent in 2013, a rate similar to 2012, to 70 million tonnes. Gains are forecast for Brazil, Chile, Colombia, Ecuador, Paraguay and Uruguay. The overall positive outlook has stimulated investment in new technology and improved animal genetics. In Argentina, production is expected to decrease in the face of falling domestic demand and limitations on exports. For Central America, milk output in Mexico, the largest producer in the subregion, has been constrained by chronically dry to drought conditions in many parts of the country, leading to herd reduction and the withdrawal of a number of small-scale producers from the industry. Production in Costa Rica is expected to show a moderate increase.
In North America, milk production in the United States is forecast to increase by only 0.9 percent to 91.6 million tonnes. Output is recovering from the sustained dry conditions of 2012 and early 2013. Production in Canada is set to remain stable at 8.5 million tonnes, within the limits set by the milk quota system.
In Europe, EU milk production is forecast to remain unchanged in 2013 at 156 million tonnes – following a slow start to the year due to exceptionally cold, wet weather, output recovered. According to 2013 EU census data, the number of dairy cattle increased for the ﬁrst time in many years. In recent months, EU producers have beneﬁtted from rising milk prices and a fall in the cost of concentrate feed. Milk production in 2013 in the Russian Federation is anticipated to decrease somewhat as its feed supplies were limited during the ﬁrst part of the year, affecting proﬁtability and leading to contraction in the dairy herd. In neighbouring Ukraine, production is on an upward trend, assisted by government incentives which promote farm-level efﬁciency and the use of modern technology.
In Oceania, sustained high prices for dairy products on the international market and associated levels of proﬁtability have stimulated the dairy sector. However, both Australia and New Zealand experienced prolonged hot, dry weather at the start of 2013, which led to a sharp fall-off in milk production. In New Zealand, up until January, output for the 2012/13 season was running 6 percent ahead of the previous one, which was itself a record, but it subsequently plummeted, ending1.3 percent down, at 19.5 million tonnes. Abundant rain in April and beyond helped pastures re-establish – the new season started well and in September was running 6 percent above 2012/2013. In Australia, the 2012/13 season was down 3 percent at 9.2 million tonnes, affected by lower milk prices, unfavourable weather conditions, high feed costs and limited fodder supplies. For the current season, while milk prices have improved, cool weather in most parts of the country has limited output. Therefore, 2013/14 production is expected to be unchanged compared to the previous season.
Limited export availability underpins prices
Trade in dairy products is projected to decline by 0.9 percent, to stand at 53 million tonnes of milk equivalent. This compares to an average growth of 7 percent in the previous four years. The two principal exporters, New Zealand and the European Union, which together account for 55 percent of world trade, and also Australia, are all anticipated to see a fall in sales. To a degree, this will be compensated for by growth in exports by the United States, India and Belarus.
In 2013, additional demand is expected from China, the Islamic Republic of Iran, Singapore and Pakistan. Elsewhere in Asia, Saudi Arabia, the United Arab Emirates, Indonesia, Japan, the Philippines, Malaysia, Vietnam and Thailand remain important markets, but the level of their imports may not change markedly and in some cases could decrease. Elevated international prices are projected to reduce imports by Africa as a whole. The principal importers that may be affected include Algeria, Nigeria, Libya, Morocco and South Africa. A number of signiﬁcant milk powder importing countries in Latin America and the Caribbean, including Venezuela, Cuba, Colombia, Brazil and Peru, may also see purchases constrained by high prices. Finally, imports by the Russian Federation are anticipated to increase, stimulated by strong demand for butter and SMP.
Read the full FAO Nov 2013 report on Milk and Milk products here
Read the full FAO Nov 2013 Food Outlook report here