World 03.01.2024

Global Milk Production Faces Challenges as New Year Begins

Source: The DairyNews
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The decrease in world milk supplies is impacting global dairy markets and contributing to recent price increases, such as the recent uptick in the Global Dairy Trade index.
Global Milk Production Faces Challenges as New Year Begins
Source: freepik.com
Monica Ganley, an analyst with the Daily Dairy Report and principal of Quarterra, an agricultural consulting firm in Buenos Aires, noted, "Milk production has been slipping across the world’s main dairy-exporting regions and countries as margin pressures, weather challenges, and regulatory burdens weigh on volumes."

In October, the combined output of the world’s top-five dairy exporters dropped 1.2% below the levels of the previous year, marking the third consecutive month of contraction and the most significant year-over-year loss since May 2022. The most substantial losses occurred in Europe, where milk production in the European Union and the United Kingdom combined fell 1.7% in October, amounting to a drop of 224,000 metric tons (MT).

Ganley explained, "The reduction in the EU and UK milk supply represented 70% of the total decline seen across all the key exporters. Industry stakeholders suggest that falling milk prices this past autumn undermined profitability, and as expectations intensified for an increasingly restrictive regulatory environment in Europe, many producers chose to exit the business permanently."

Losses were also observed in the United States, where thin margins and a decreasing milk herd led to a 0.7% year-over-year production decline of 61,000 MT. In November, the U.S. experienced a further 0.6% decrease in milk output compared to the previous year, marking the fifth consecutive month of year-over-year declines. The U.S. milk-cow herd reached a three-year low in November, setting the stage for continued contraction in milk production.

Argentina faced a 4.3% decline in output, amounting to 49,000 MT, as the new government, led by President Javier Milei, introduced economic reforms impacting the agricultural and dairy sectors. The devaluation of the official exchange rate and the implementation of a 15% export tax were notable changes, although the dairy sector secured an exemption from the export tax.

In Oceania, New Zealand experienced a modest 0.3% dip in production in October, while Australia, the only key exporter to witness a volume increase, saw output rise by 2.1% compared to the same month last year, contributing approximately 19,000 MT of milk to the global total.

Ganley emphasized the precarious outlook, stating, "Looking forward, even though most factors pressuring milk production lower are likely to persist, global demand remains weak, suggesting that further milk production losses may be necessary before milk and dairy product prices can significantly rise."
Aaron Smith
Aaron Smith
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February 2024
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