International prices of several dairy products declined in 2014 following new highs attained in 2013. Nominal prices over the medium term are expected to firm. Real prices are projected to decline slightly in the next decade, albeit remaining considerably above the pre-2007 levels.
World milk production is projected to increase by 175 Mt (23%) by 2024 when compared to the base years (2012-14), the majority of which (75%) is anticipated to come from developing countries, especially from Asia.
The growth rate for milk production over the projection period is expected to average 1.8% a year which is below the 1.9% a year witnessed in the last decade.
Dairy cow numbers are expected to decline in developed countries, whereas herd expansion in developing countries is projected to slow down. In terms of yield per dairy cow, faster increases are expected than in the previous decade, mainly in developing countries.
Production growth of the main dairy products (butter, cheese, SMP and WMP) is increasing at the world level at similar pace as milk production. Resulting in a slightly faster increase in the production of fresh dairy products especially in developing countries by 3.0% a year where the majority of consumption is in the form of milk or other fresh dairy products.
Per capita consumption of dairy products in developing countries is expected to increase by 1.4% to 2.0% a year. The expansion in demand reflects continuing albeit more modest income growth and further globalisation of diets.
By contrast, per capita consumption in the developed world, reflecting the already relatively high per capita consumption of these products, is projected to increase between 0.2% and 1.0% a year, with the lower figure for butter, which competes with vegetable oil, and the higher figure for cheese.
Nevertheless, butter recovers from declining consumption in developed countries observed in the last decade. A general expansion of trade in dairy products is expected over the coming decade.
Strong growth is expected for whey, WMP and SMP, at more than 2% a year.
Lower growth is expected for cheese and butter, at 2.0% a year and 1.5% a year, respectively.
The bulk of this growth will be satisfied by expanded exports from the United States, the European Union, New Zealand, Australia and Argentina (Figure 3.5).
In the recent past, the international dairy market has been supplied by a few countries. This concentration is expected to increase over the next decade. New Zealand is the lead exporter for butter and WMP, whereas the European Union is the main exporter of cheese and SMP.
Development of the dairy market remains uncertain, potentially altering market outcomes as described. Major impacts can come from disease outbreaks, trade restrictions, weather developments and policy changes. World demand will remain strong, especially
from China. Nevertheless, the development of Chinese self-sufficiency ratios in milk and dairy products is a main determinant of the future price development on world dairy markets.
The Outlook assumes a slight increase in China’s import dependency. The largest supplier of dairy exports, New Zealand, is weather dependent due to the predominantly pasture-based production, and environmental constraints could curb the projected
production growth.
Download the full dairy section of the Agricultural Outlook 2015-2024 here
