Chart: Signs of a Global Supply Correction but SMP/NDM Demand Still Lags

Prices have increased as milk supply slows. But economic challenges are likely to limit demand-driven expansion in the short term.

Note: Each month USDEC digs into our data to visually illustrate a point about global dairy market trends. Get this and other data-based blog posts delivered to your inbox as soon as they are published. Subscribe to the U.S. Dairy Exporter Blog.

Through the first six months of 2016, the EU-28 (the world’s leading SMP supplier) saw third-country SMP shipments fall 14 percent compared to the first half of 2015. With weak demand reflected in lower prices, European intervention offered better returns. From March-June, EU-28 volume was down an average of 13,500 tons/month.

In the first half, EU exporters experienced sizable declines in sales to Southeast Asia (-16 percent vs. January-June 2015) and the Middle East/North Africa (-13 percent).

SMP/NDM exports from No. 2 supplier the United States declined only 4 percent in the first half of the year, after adjusting for shipments to Mexico that were classified incorrectly as WMP. But U.S. shipments to China (-52 percent) and Southeast Asia (-17 percent) fell sharply during that period. 

Buyers have shown greater urgency over the last month, but demand growth is facing strong economic headwinds as lackadaisical global GDP expansion (even contraction in some nations) limits any uplift in consumption. Political turmoil, low oil prices, uncertainty over potential Brexit fallout and a stronger U.S. dollar have created a poor climate for robust demand gains. Although long-term dairy demand expectations remain positive well into the future, economic woes are likely to continue to limit demand-driven gains over the short-term.

Shown below are two interactive charts that help illustrate the situation. The top chart shows SMP/NDM exports for six exporting countries or regions—the United States, EU-28, India, New Zealand, Australia and Argentina. The interactivity of the chart also allows you to dive deeper into the numbers not only for SMP/NDM but cheese and other commodities. The bottom chart shows trend lines for the EU-28's SMP/NDM exports.   

Editor's note: The charts work best on a PC and may not render properly on a mobile device. Also, the numbers in the charts change automatically as new data come in. You can access all of the latest trade flow charts on usdec.org here. The analysis on this page is based on available data on August 22. 

Learn more:

• August's Dairy Data Dashboard
• Overall Volume Up on Record WPC Exports
• Chart: Has Global Milk Production Turned a Corner?
• U.S. Export Volume Posts 11-Month High
• When Will Global Dairy Prices Rebound?
• The Global Dairy Situation in 7 Charts

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The U.S. Dairy Export Council fosters collaborative industry partnerships with processors, trading companies and others to enhance global demand for U.S. dairy products and ingredients. USDEC is primarily supported by Dairy Management Inc. through the dairy farmer checkoff. How to republish this post.