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Dairy sector: A global view

Dairy sector: A global view

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  16 Jan 2018 12:00 AM GMT

By Dr B K Mukhopadhyay

Global milk production is now estimated to expand by a slower rate, a far slower pace than in recent years. Growth prospects have been affected by a number of factors as intertiol markets have been responding to the historically high intertiol price levels of the past couple of years. On balance, prospects for the world’s six major milk product exporters, which supply 77 percent of global trade, have improved somewhat in recent months. Their milk production is now expected to hover around 40 percent of global production). But production growth is slowing in some regions, due to high feed prices and high opportunity costs for pasture. In some areas, new issues have surfaced that may affect consumer demand.

In particular, food safety concerns are currently clouding the dairy outlook. Dairy products [which include milk, butter, cheese and eggs] make up 0.8 percent of world trade.

As with many trade maps, Europe is large and Africa is very small on this map.

In terms of US dollars worth of dairy products exported (net), New Zealand has the highest per person earnings at US$ 641 a year. Dairy produce from New Zealand is exported to 140 different territories, 3.5 million dairy cows live there.

Overall, less than a quarter of the world territories have net dairy exports. If the current trends are of any indication: commodity wise and country wise picture reflects not a very rosy picture indeed. Skim milk powder exports are now expected to rise, particularly due to recent past increased exports from the United States, which had been larger than expected. Exports from New Zealand, Australia and the European Union are anticipated to decline margilly in 2012, but are likely to be higher than previously expected. Imports to both African and Asian countries are expected to increase, stimulated by comparatively lower prices. Imports by Mexico are expected to continue at previous levels, given the importance of and support for its social feeding programmes.

Expanding markets

Global exports of whole milk powder are expected to rise, as global milk supplies expand. Whole milk powder remains the key milk product exported by surplus milk producing regions to growing developing country markets. New Zealand, the largest whole milk powder exporter, is set to increase sales. But the largest increases are expected to be there from the European Union, as its milk production increases. Deliveries by Australia and Argenti are expected to be better. Algeria and Venezuela are the two largest importers of whole milk powder, and while imports in the former have declined considerably, those of the latter have remained firm, despite high prices. Milk production in these two countries has been increasing, under efforts to replace imports.

As per latest trends: intertiol cheese trade continues to grow and is by far the highest value market for milk products; exports are expected to go up steadily. Exports from the European Union are expected to fall. The United States increased its exports of cheese and reduced its imports during the recent price spike and it is uncertain whether this situation will be sustaible as its dairy sector slows under falling domestic prices and high feed costs. On the import side, most of the growth in trade occurred within the Russian Federation and the growth of this market will depend on how the country fares in the current economic conditions.

Changes: Speed to be jacked up

It is also becoming clearer that regiol trade shares are changing, and this may mark the new emerging structure of the world dairy market. Europe’s role as a major source of supplies for trade has diminished significantly, as has that of Oceania, while those of the America’s and Asia have grown. The United States may export, increasing its trade share to around 12 percent. Conversely, the trade share of the European Union is set to fall. Milk production is now expected to rise by only margilly in Asia. This reduced rate of growth is largely caused by a sharp slowdown in Chi [now the world’s fourth largest dairy producer]. The reduced speed reflects increasing production limits, related to water and feed supplies, as well as the fact that the size of the production base has increased substantially.

The reduction of production growth in Chi may be critical in the longer term for world dairy markets. If domestic demand would continue its pace, imports could grow significantly. However, the discovery in mid 2008 that melamine had been blended into a significant portion of the Chinese milk supply to enhance the protein content of watered down milk has cast severe doubts over Chi’s dairy sector, including its growing product export potential, but also suppressed consumer confidence worldwide, especially in developing countries. Elsewhere in Asia, strong output growth is forecast in the large traditiol milk producers: India is expected to sustain its normal growth, while Pakistan looks set to increase production as high interl prices have stimulated investments in the sector. However, all of Pakistan’s increased production will be absorbed domestically.

South America is all set to be the fastest growing milk production region. Argenti’s milk production growth has been limited by lower returns due to large export taxes on milk products, whereby taxes are adjusted to maintain lower domestic prices. This policy induced some milk producers to participate in tiol strikes and blockades in early 2008. Brazil may soon be the second largest exporter in the region or even the largest if current trends continue over the next several years. In other parts of Latin America and the Caribbean, Mexico, one of the world’s largest importers of milk powders, will post limited milk production gains given high feed costs and a shortage of domestic available feed.

As a whole milk production in Africa is anticipated to be consistently below world average growth, showing weaker supply response to the price spike. But the United States’ dairy sector responded significantly to attractive interl and exterl prices in the last couple of years. However, this growth is lower than expected, due to the downturn in profitability experienced so far this year, as indicated by the milk to feed price ratio.

This has limited milk yield growth and has induced higher culling of cows. In addition, the recent appreciation of the United States Dollar has lowered the competitiveness of the United States’ industry on intertiol markets compared with the situation of even a couple of years back. In Cada, higher feed costs have induced yet higher target prices, and this has limited domestic market growth; production is expected to remain stable. Back home: In India today the animal husbandry and dairy sector has occupied a very significant position in as much besides providing cheap nutritiol food to millions of people, it is helpful in generating gainful employment in the rural sector, particularly among the landless labourers, small and margil farmers and women by supplementing their family incomes. Livestock continues to be the best insurance against the vagaries of ture like drought, famine and other tural calamities.

No complacency please!

The valued comments made by Verghese Kurien - the ever-remembered milkman of India - must be taken in the right spirit indeed.’ The Indian dairy industry was still suffering under colonial cooperative laws that do not ensure a level playing field for the cooperatives making them globally incompatible’. It is better not forgotten that India has vast resource of livestock and poultry, which play a vital role in improving the socioeconomic conditions of rural masses. India ranks first in respect of buffalo, 2nd in cattle and goats, 3rd in sheep, 4th in ducks, 5th in chickens and 6th in camel population in the world. India has around 57 percent of the world’s buffalo population. The Livestock Sector not only provides essential proteins and nutritious human diet through milk, eggs, meat, etc. but also plays an important role in utilization of non-edible agricultural by-products.

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