Dairy - OECD-FAO Agricultural Outlook 2013-2022

 

Global milk production is expected to increase at a slower rate in the next decade as feed-based dairy operations struggle with high feed costs, while pasture based systems face land competition and water shortages.

 

SMP: Skim milk powder; WMP: Whole milk powder

» See all data for dairy products

Market situation

Driven by robust growth in import demand from developing countries, international dairy prices rose strongly through 2010 and into the first half of 2011, peaking at levels close to those of the 2007/08 commodity boom. High returns and excellent pasture conditions in Oceania, and parts of South America, generated a supply response triggering a fall in prices. This decline in prices continued through to the second half of 2012. It was accompanied by an expansion in export volumes. With demand continuing to expand, especially from China, prices bottomed out at levels much higher than during the previous downturn in 2009.

The 2012 droughts in the United States and the Russian Federation drove up grain prices, lead to lower dairy output growth in the United States and the European Union, and higher dairy prices. In early 2013, the recovery in prices intensified as reports of much drier weather conditions in Oceania began to impact market expectations of product availability.

While the short term supply situation is tight, it is expected to ease over the medium term assuming normal weather conditions, keeping prices below the elevated levels of 2011. 

 

Projection highlights

  • World milk production is projected to increase by 168 Mt in 2022 when compared to the base years (2010-12), the majority of which (74%) is anticipated to come from developing countries. India alone accounts for 29% of the change in global milk supplies. The average growth rate for the projection period is estimated at 1.8% which is below the 2.3% witnessed in the last decade. The slowdown in growth reflects growing shortages of water and suitable land among developing countries.

  • Consumption of dairy products in milk equivalent in developing countries is expected to increase on average at around 2% p.a. The expansion in demand reflects robust income growth, expanding populations, further westernisation of diets and greater access to refrigeration facilities. By contrast, consumption in the developed world is projected to increase on average by less than 1% p.a.

  • An upswing in international dairy prices is underway   nominal prices in general are expected to continue firming throughout the projection period but in real terms will ease from 2014 especially for butter. The outlook for the next decade sees real prices averaging significantly higher than over the 2003-12 period.

  • A general expansion of trade in dairy products is expected over the coming decade. Of the main products, butter, cheese and SMP are likely to show average annual increases between 1.6-2.1% p.a. The vast bulk of this growth will be satisfied by expanded exports from the United States, the European Union, New Zealand, Australia and Argentina. This Outlook sees a major expansion in US dairy exports of butter, cheese, SMP, and whey powder with increases of 54%, 35%, 63% and 29%, respectively, from the 2010-12 base period.