5 Reasons Global Dairy Demand Could Curb by End of 2014

Increased milk production in New Zealand, the EU and elsewhere can't be ignored.  

Historically high commodity prices that have held for almost a year have priced some buyers out of the market. This has encouraged substitution in some applications. That, in turn, could curb global dairy demand later in the year.

Download the March Global Dairy Market Outlook for 11 reasons global demand may slow. Or read on for the first five reasons global markets could see this change:

1. From August-February, milk production in the EU-28 and New Zealand was up approximately 4% from the prior year—an additional 530,000 tons of milk per month. Record milk prices have created a strong incentive to push volume, and weather has been favorable for cow comfort.

2. Among the five major suppliers, milk production in the November-January period was up about 2.5%.

3. On Feb. 27, Fonterra increased its 2013/14 payout to NZ$$8.65/kg MS, up 48% from the prior year. New Zealand milk production for the current season is on track to finish 7-8% ahead of a year ago, despite scattered dry areas around the country. Australia production is now slightly ahead of the depressed levels of a year ago, but will likely finish the year down about 1%. (See Global Milk Production, p. 7)

4. In December, EU-28 exports of milk powder,cheese, butterfat and whey were up 25% from the prior year, with a 49% jump in milk powder sales. EU-28 production of SMP in the second half of 2013 was up 8% from the prior year.

5. China purchased record volumes of WMP in January: 124,938 tons, up 62% from the prior year. This product was purchased at $5170/ton, according to Chinese customs data. The remarkably heavy purchases reflect the desire to buy under the preferential tariff rate that resets at the beginning of each year.

(This post is excerpted from the Global Dairy Market Outlook, a publication of USDEC. Download here. In addition to describing the latest international market drivers, this publication covers export and import quantities from major suppliers and buyers, global milk production, world price trends, currency exchange rates, U.S. export performance and the U.S. market situation.)

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The U.S. Dairy Export Council is primarily supported by Dairy Management Inc. through the dairy farmer checkoff that builds on collaborative industry partnerships with processors, trading companies and others to build global demand for U.S. dairy products.