The Global Dairy Market Outlook 2018

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Global Dairy Production Surges Forward, Overtakes Consumer Demand

The production and trade of dairy products is historically among the most difficult sectors of the world economy to make accurate industry predictions. It’s helpful to step back and take a grand survey of what’s happening in dairy production around the globe. 

 

A Global Snapshot

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As of 2018 the United States remains the No. 1 producer of dairy in the world. Some would argue differently, but most experts agree that determining the true dairy leader is a matter of highly accurate, scientific and well-vetted statistics. American dairy stats are exceptional. 

Production On The Rise 

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American dairy production has been increasing incrementally for 20 years, with only 2001 and 2009 being the exceptions. Total production topped 215 billion pounds in 2017, a 1.4% increase (3 billion pounds) from 2016. 

Meanwhile, Canadian and European Union milk production have been surging. Canada expanded 5% in 2017 and Mexico charged forward with an 8% increase. Across the Atlantic the 28 dairy-producing European Union nations upped their game by 2%. The EU-28 are forecast to increase production by a hefty 176 million tons through 2026. These are weighty increases in production by Canada, Mexico and the EU-28. 

One factor that may help alleviate increased global production is a fast growing market for milk and cheese in China. U.S. dairy-exports to China expanded by a robust 25% in 2017 over 2016. 

Significant changes in the Australian dairy industry have pushed it just out of the world top ten producers -- but Australia is extremely aggressive about exporting what it does produce. More than 51% of Australian dairy products are sold for export. It should also be noted that New Zealand ranks 8th in dairy productions. 

China itself has undergone reduced dairy product in the past two years. At the same time, its population has grown and domestic demand for dairy has risen, making China an attractive market. Even so, China is expected to ramp up its own dairy production through 2018 and may achieve a 3% growth rate. 

New Forces In Dairy 

Just five years ago, Belarus, Canada, Iran and Turkey combined exported less dairy than Australia alone. But today these countries have come on strong and now export five times as much as Australia. 

Other countries making a move on the world export market are Saudi Arabia ( up 16.8%), Ireland (up 14.5%), Netherland (up 7.5%) and Poland (up 5.2%). 

Russia Seeks Dairy Self Sufficiency 

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The Russian dairy situation has been rocked by international strife which have resulted in food embargoes to and by Russia. The Russian government slapped a food embargo on the European Union in response to sanctions placed against Russia after it invaded Crimea and Ukraine. 

Russia is seeking to develop full self-sufficiency in dairy. For years is has been importing some 50% of dairy consumed within it borders, but embargoes and sanctions have complicated the situation. 

Plans call for the construction of 800 large-scale dairy farms of at least 3,000 head each over the next two years. If they can accomplish that, Russia may be within reach of its goal of dairy independence -- although experts say even then it will likely import 5% to 10% of its total dairy consumption. 

South America

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Brazil is consistently one of the largest dairy producing countries in the world. In 2016 the country experienced its largest drop in production in 55 years, however. A major factor was drought which devastated Brazilian cattle feed production -- but another was competition from lower international milk prices. Local dairy farmers simply could not compete with cheap imports. 

Observers think Brazil dairy will make a full comeback this year, however. 

Argentina, Uruguay and Chile remain strong producers and competitor on the world dairy scene, although each have experienced special challenges of their own. Argentina is expected to increase production by 5% in 2018. 

The Strength of World Supply

The five top dairy exporting nations have increased production by an average of 2.5% -- which means the supply side is a tad too high for sellers. The world market cannot absorb increases that large year-to-year. A 1.5% annual increase is about right in the current global dairy climate.

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