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Europe is the world’s largest dairy-exporting region, accounting for 40% of total global dairy exports. France and Germany are Europe’s two largest milk producers, together accounting for 35% of the total European milk supply.
Poor weather conditions and rising feed costs have hampered supply in France and Germany so far in 2021, and despite supply growth in Italy (2%), Poland (2%) and Ireland (+10%), which account for 21% of supply collectively, total European milk production was back 1.4% for the period from January to March (quarter one).
Beyond the EU
New Zealand accounts for 30% of total dairy exports globally. Milk production growth has recovered since the turn of the new year in New Zealand as farmers experience near-perfect weather conditions and the highest milk price received in some years.
Although volumes are seasonally low at this time of the year in the southern hemisphere – its production season is June to May, peaking in October – April production was up 11% on April 2020, taking year-to-date production to +4% on 2020.
The US is a major exporter and accounts for approximately 20% of total dairy exports. US cow numbers are at historically high levels, and despite higher feed costs beginning to pinch margins, milk supply for the year as of the end of April was up 2.1%.
Despite accounting for smaller export volumes, all of the other major exporting regions (mainly Australia, Argentina, Brazil, Uruguay) are in year-on-year growth with global milk supply predicted to be up 1.3% this year.
Strong dairy demand has supported buoyant prices of late, with the Global Dairy Trade (GDT) index up 23% since the start of the year.
GDT prices for skim milk powder (SMP) are up 26% on this time last year, currently trading at $3,447 with butter prices also up 26% and whole milk powder (WMP) up 33%. China has been the key driver of dairy demand, with imports in April alone up almost 30% on April 2020. Chinese dairy imports rose 16% in 2020, and as of the end of April total imports for the year to date are up 438,000t (34%) compared to last year.
A declining birth rate in China remains a concern, with recently published stats showing there were six million fewer babies born in 2020 than 2016.
However, Chinese consumers are looking to dairy products with immune boosting principles, and the rising global demand for electronics and other consumer goods has bolstered the Chinese economy, pushing more people into the middle-class.
New Zealand is the main source of Chinese dairy imports, and accounted for 35% of total imports in 2020.
Higher freight prices as a result of congestion at some western ports and difficulties in sourcing containers has allowed New Zealand to take advantage of its relative close proximity to China, which helped to drive GDT prices higher in quarter one this year.
Evolving consumer trends present an opportunity for Irish dairy, as shoppers are increasingly making purchasing decisions based on transparency, health and nutrition.
By virtue of our system of production and Irish dairy farmers’ commitment to the Sustainable Dairy Assurance Scheme, Irish dairy products have the proof points in place to meet consumer expectations about where their food comes from and how it has been made.
At the Bord Bia dairy markets seminar in April, Lu Ann Williams, global insights director at Innova insights, said: “Consumers are now, more than ever, looking for transparency in the products they buy.”
Transparency refers to being open and honest with consumers in terms of food sourcing, ingredient lists, nutritional information and environmental impacts.
The Sustainable Dairy Assurance Scheme allows the dairy industry to substantiate the environmental impact of Irish dairy products, and gives consumers the confidence in the food and drink they buy.
Health and nutrition is an ever-growing trend, and our grass-fed system of production provides a unique point of difference for Irish dairy.
The benefits of grass-fed dairy are not limited to environmental sustainability.
Teagasc research has shown that grass-fed dairy is also superior in terms of taste and nutrition, the importance of which are expected to continue influencing consumer purchasing decisions.
Grass-fed milk has significantly higher levels of milk fat and protein compared to total mixed ration (TMR) systems, and Irish dairy farmers’ ability to maximise the amount of grazed grass in their cow’s diet will continue to be key in providing a point of difference relative to our competitors in terms of taste and quality.
Nutrients
Grass-fed milk contains a significantly higher level of beneficial nutrients, including vitamin A precursor, ß-carotene and minerals including calcium, phosphorus, magnesium and manganese, and has a twofold increase in conjugated linoleic acid and significantly higher concentrations of omega-3 fatty acids.
These trends along with many others have been accelerated over the course of the Covid-19 pandemic, as consumers increasingly look to food that not just meets their taste expectations, but matches their personal beliefs also.
Although physical in-person trade events are returning in many markets, Irish exporters remain constrained by travel restrictions.
This was highlighted by Ian Proudfoot, global head of agriculture with KPMG, in a recent webinar as being an issue for New Zealand as well.
In the interim, online trade events remain an essential and useful method of business engagement for dairy exporters.
Bord Bia recently hosted an Egypt and Algeria Ireland Dairy Ingredients Forum (from 25 to 27 May) connecting Irish dairy suppliers with Egyptian and Algerian buyers in a series of virtual business meetings with Irish dairy processors.
These two countries import a combined volume of 703,000t per annum.
Their demand has grown 34% in the last 10 years, positioning them as priority markets for Irish dairy exports.
Research
The forum also included detailed insights from research group GIRA on international market trends for dairy ingredients and how COVID-19 is influencing consumer behaviour. The event was designed to build on the ministerial-led trade mission to the region, which took place in February 2020.
