meta Asia and Middle East Drive World Dairy Market Growth in 2020 :: The Bullvine - The Dairy Information You Want To Know When You Need It

Asia and Middle East Drive World Dairy Market Growth in 2020


Highlights

  • The Dairy Price Index in 2020 averaged slightly lower than in 2019
  • World milk output continued to rise in 2020, with Asia registering the highest volume increase from 2019
  • World trade in milk products rose in 2020, driven by a few Asian and Middle Eastern countries.
  • International trade in whole milk powder, whey and cheese rose, while that in skim milk powder and butter fell

Global dairy prices

International dairy prices registered a slight decline in 2020 

International dairy prices, measured by the Food and Agriculture Organization of the United Nations (FAO) Dairy Price Index, averaged 101.8 points in 2020, down 1.0 points (1.0 percent) from 2019, primarily reflecting reduced import demand due to widespread economic downturns in many dairy importing countries. High export availabilities in exporting countries, caused by reduced internal sales, coupled with increased processing of less labour-intensive milk products, especially milk powders, to overcome labour shortages, also weighed on global milk prices.

Among the milk products represented in the index, butter prices fell the most (-13.5 percent). FAO butter price index was already trending downward since reaching its peak in 2017. COVID-19-related import curtailments and reduced internal sales accelerated the decline, depressing prices by 16 percent (from USD 4 043 to USD 3 403 per tonne) between January and May, but prices began recovering since June in response to solid import demand and internal consumption stability. The annual average whole milk powder (WMP) prices declined by 4.5 percent in 2020 due to lower purchases by Asia, especially China, Bangladesh, Malaysia and Singapore. Reflecting the economic crisis and falling petroleum price, WMP imports by the Middle East and North Africa (MENA) region also registered a noticeable dip, negatively impacting international WMP quotations. Like the other milk product prices, skim milk powder (SMP) prices also fell during the first several months of 2020, as many large milk powder importing countries lowered imports in line with economic downturns and lower demand from industrial food processors and food services sectors.  However, prices trended upward from May, lifting the annual 2020 average value by 6.8 percent, mainly due to limited supplies in Europe and increased import demand from Middle Eastern and Asian countries. International cheese prices also increased by 2.1 percent in 2020, underpinned by solid import demand and sustained internal consumption in leading producing regions, mainly Europe and North America, with increased retail sales offsetting declines in food services sales.

Global milk production

World milk output rose in 2020

Global milk production reached nearly 906 million tonnes in 2020, up 2.0 percent from 2019, driven by output increases in all geographical regions, except in Africa, where production remained stable. Milk volume increases were highest in Asia, followed by Europe, the Americas, Oceania and Central America and the Caribbean.

In Asia, milk output rose to 379 million tonnes1 in 2020, up 2.6 percent year-on-year, principally driven by increases mainly in India, China, Pakistan and Turkey. Kazakhstan, Uzbekistan and Japan too registered moderate production expansions.

In India, milk output reached 195 million tonnes in 2020, up 2.0 percent from 2019, underpinned by the continued rise in dairy cattle numbers and improved feed and fodder availability on favourable monsoon rains (June to September). The fast mobilisation of the village cooperatives’ network at the early phase of the pandemic and channelling milk into drying plants further facilitated milk output growth. In China, the increased output of large-scale dairy farms and their operational and production efficiency improvements underpinned the over 7 percent milk output growth. In Pakistan, milk output increased by 3.2 percent, mainly due to a rise in cattle numbers, partially offset by poor milk collections during the pandemic’s early phase. Besides herd numbers, farm efficiency improvements and solid import demand helped Turkey to sustain milk production growth. In Kazakhstan and Uzbekistan, two of the largest milk producers in Central Asia, the output increase reflected modernising farms with rising dairy cattle, although smallholders remain the dominant force. In Japan, price support to farmers under government COVID-19 assistance, combined with the lowering of tariff-rate quotas (TRQs) for butter and SMP, ensured milk market stability and production growth.

In Europe, milk output rose to 236 million tonnes, up 1.6 percent from 2019, mainly due to production increases in the European Union, the Russian Federation and Belarus. In the European Union, yield improvements, a slight increase in dairy cattle numbers and robust internal and foreign demand were behind the production expansion. The European Union COVID-19 livestock assistance programme also helped to stabilise farm-gate prices, encouraging high milk deliveries. In the Russian Federation, milk production rose, buoyed by yield improvements in large-scale dairy farms.

The Russian government initiative to trace and remove products that flout regulatory requirements from the market and introduce the obligatory electronic certification “Mercury” system2 re-established consumer confidence, lifting internal demand. In Belarus, farm management improvements, quality feed use and the continued solid purchases by the neighbouring countries, mainly the Russian Federation, were crucial in production expansion. By contrast, Ukraine’s output declined due to multiple factors, including fast declining cattle herd, increased feed costs, falling farm profitability and weak import demand.

In North America, milk output reached nearly 111 million tonnes in 2020, up 2.1 percent from 2019. In the United States of America, milk output rose by 2.2 percent to 101 million tonnes, driven by increased dairy herd numbers and milk yields. COVID-19 livestock sector assistance helped sustain internal demand and production, despite pandemicrelated adverse impacts, especially labour shortages and transport hurdles. Buoyant import demand from Asia was also a factor that helped milk production expansion. In Canada, milk output increased slightly, despite a slowdown in milk deliveries due to labour constraints and plummeted milk sales in early 2020.

In Central America and the Caribbean, milk production expanded by 1.6 percent to 18 million tonnes, driven by increased production in the region’s largest milk producer, Mexico. Following nearly a decade-old growth pattern,

Mexico’s 2020 production expanded by 2.2 percent from 2019, as improvements to farming technology and genetics continued. Animal feed production too increased, boosting output.

In South America, milk production expanded by 2.0 percent to nearly 82 million3 in 2020, driven by higher outputs in Argentina, Brazil, Chile and Uruguay, partially offset by a decline in Venezuela. In Argentina, milk production expanded faster than anticipated earlier due to improved pastures and internal and foreign demand. Freezing retail milk prices helped sustain demand, which, incidentally, lowered dairy farm profits. However, the subsequent decision to allow a 2 percent increase in retail milk prices stabilised farm profit margins, helping production. Brazil’s milk output rose, helped by milk production recovery in the last quarter, following one of the country’s most prolonged droughts between May and October 2020. High milk outputs of large-scale dairy farms that rely on animal feed use also supported sustaining an output expansion. In Chile, milk production rose, mainly due to significantly increased milk prices compared to the previous year. Uruguay too benefitted from favourable weather, including good rainfall.

In Oceania, following a 2.5 percent contraction in 2019, milk output expanded by 1.1 percent to 31 million tonnes in 2020. After four years of declines, milk production in Australia rebounded by over 9 million tonnes, underpinned by good rains, improved pastures and increased fodder and feed availability. Government assistance to drought-affected 2 The “Mercury” is the national electronic veterinary certification system in the Russian Federation, which tracks animal product movements and is part of the Federal State Information System (FGIS). Mercury system requires all stakeholders in the dairy value chain from farms to processing plants to register dairy product movements, while the National Track and Trace Digital System (Chestny ZNAK) registeres movements from processing plants to the customer. The government began implementing the system by launching a pilot on on 15 July 2019. farming households and the extension of farm household allowances also contributed to production expansion.

In New Zealand, following a marginal (0.7 percent) contraction in 2019, milk output rose slightly (+0.4 percent), reaching 22 million tonnes. Favourable weather and robust import demand from China and countries in the MENA region were behind the production growth. Despite COVID-19 market disruptions, profit margins remained attractive on account of high farm-gate prices offered by the leading milk cooperative and government financial support to cover increased freight costs.

In Africa, milk production remained stable, at 49 million tonnes. Algeria registered a significant output increase, whereas Kenya, Ethiopia and South Africa, among others, registered declines. Algeria’s output increased by 3.8 percent to 3.3 million tonnes, helped by the farm modernisation programme granted land for dairy production, pasture development and opportunities for importing genetic materials. Algeria’s prohibition of subsidised milk powder for manufacturing pasteurised milk, milk products or derivatives also boosted output. In Kenya, following three years of expansions, milk production fell marginally, owing to drier and warmer weather in 2020’s last quarter, which constrained animal feed availability. Ethiopia also faced dry weather conditions, especially in the Southern parts of the country, constraining production. South Africa’s production declined slightly due to dry weather conditions and feed price increases that lowered farm profits. Elsewhere in Africa, adverse market conditions were prevalent, stemming from economic downturns, conflicts and displacements, droughts, and floods in some regions, limiting milk production.

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