Difficult production caused by weather is expected to limit growth in EU dairy production in 2018 to 0.6% to 167m tonnes. And the weather effects of 2018 will possibly impact on production in quarter one of 2019, with growth in production forecast to be 0.7% next year.
The EU dairy industry is forecast to grow by 0.8% annually until 2030, when total production is predicted to be 182m tonnes from the expected 21.9m dairy cows. Yields are predicted to grow from 7,050kg per cow in 2017 to 8,240kg per cow in 2030, an increase of 17%.
On price, the EU raw milk price in 2018 is predicted to be €34/100kg, which is 2% below the last five-year trimmed average.
The recovery and stability in milk prices is explained by falling stocks of skimmed milk powder and good demand for dairy products. Intervention stocks have been reduced to 170,000t, which could be cleared completely in 2019.
Lower milk production in some EU countries and lower fat content has meant lower supply of butter, which has driven butter price to an average of €5,100t, which is 50% above the five-year average.
While cheese prices have been below 2017 levels they have remained consistently around €3,300t over this year.
By 2030, world milk production is expected to be above 1bn tonnes, increasing annually by over 15m tonnes, with 40% of the increase in India, primarily for the domestic market.
Increasing demand in Africa and Asia is forecast to be ahead of their ability to increase production and therefore will be a growing market for exporting countries.
While milk powders will be the core business, demand is also predicted to increase for dairy products, according to the EU’s forecast.
Cheese is a big performer for EU dairy industry.
Cheese is EU ace
Cheese is broken into two categories – domestic consumption, which is personal use, and industrial, which is driven by the convenience food sector where cheese is a key ingredient.
In the EU, the market is divided 50:50 and the EU forecasts that per-capita cheese consumption will grow by 1.3kg to reach 20kg per person by 2030.
Geographical indicators are key branding in the personal consumption cheese markets and generate a premium in internationally traded cheese beyond the EU.
Exports of EU cheese increased by around 40% in the decade between 2007 and 2017 and this growth is forecast to continue through until 2030. By then, the report predicts the EU will be exporting 1.2m tonnes of cheese, which would be 40% of the global cheese trade, up from 34% in 2018.
Butter is back in fashion.
Butter in fashion
EU consumption of butter is forecast to reach close to 4.6kg per capita in 2030 in the EU outlook report, 0.3kg above the 2018 level. Global demand is forecast to lead to an increase of EU exports to approximately 260,000t.
Butter prices have been extremely volatile over the past couple of years, peaking this year at almost €6,400/t though this is expected to drop to around €4,500/t by the end of the year. The EU outlook is forecasting a butter price of €4,000/t in 2030.
Whole milk powder (WMP)is facing increasing competition from South America and the EU share of global trade is forecast to fall to 12% in 2030 from the present 14%.
Demand will remain strong within the EU, however, with WMP production forecast to grow by 4m tonnes per year up to 2030, due to higher domestic demand forecast to increase by 4.2m tonne annually, with chocolate the main source of this increased demand.
On skimmed milk powder (SMP) the EU is a huge global player accounting for the supply of 50% of the total product traded.
Volumes traded doubled in the decade 2008 to 2018, with the EU accounting for half the increase. Over the decade, the EU had been increasing its exports annually by 16%, reaching a record total volume of 780,000t in 2017.
The EU outlook report is forecasting that volumes traded will grow by 240,000t milk equivalent per year up to 2030, with the EU taking a 30% share of global exports.
This growth in demand is predicted to lead SMP production reaching 1.8m tonnes by 2030, 18% above the 2018 levels and creating a demand for an additional 2.2m tonnes milk equivalent being used for SMP processing.