World Milk Production Expected To Increase 1.6% Per Year Through 2029

World milk production is projected to grow by 1.6 percent per annum through 2029, faster than most other main agricultural commodities, according to a new report from the Organization for Economic Cooperation and Development (OECD) and the UN Food and Agriculture Organization (FAO).

In contrast to the previous decade, the projected growth of cow herds is slightly higher than the projected average yield growth, as cow herds are expected to grow faster in countries with low yields, according to the joint OECD-FAO Agricultural Outlook 2020-2029.

It is expected that India and Pakistan will contribute more than half of the growth in world milk production over the next 10 years, and will account for more than 30 percent of global production in 2029.

Production will occur mostly in small herds of a few cows or buffaloes.
In both countries, the vast majority of production will be consumed domestically as few fresh products and dairy products are traded internationally, the report said.

It is projected that less than 30 percent of milk will be further processed into products such as cheese, butter, skim milk powder, whole milk powder, or whey powder.

There is considerable direct food demand for butter and especially cheese, and they currently account for a large share of consumption of milk solids in Europe and North America. SMP and WMP are highly traded and largely produced for trade only.

Over the projection period, butter production is projected to grow at 1.6 percent per annum, SMP at 1.6 percent per annum, and WMP at 1.7 percent; all at similar growth rates as overall milk production. Only cheese production is projected to grow slower at 1.2 percent per annum.

The slower growth rate for cheese is due to the importance of slow-growing food markets in Europe and North America.

Fresh Dairy Consumption To Rise
Most of the global dairy production is consumed in the form of fresh dairy products, including pasteurized and fermented products, the report noted.

The share of fresh dairy products in world dairy consumption is expected to increase over the coming decade due to stronger demand growth in India and Pakistan in particular, which in turn is driven by income and population growth.

In Europe and North America, overall per capita demand for fresh dairy products is stable to declining, but the composition of demand has been shifting over the last several years towards milkfat, such as full-fat fluid milk and cream.

The largest percentage of total cheese consumption occurs in Europe and North America, where per capita consumption is expected to continue to increase.

Cheese consumption will also increase where it was not traditionally part of the national diet, the report said. This is the case, for example, in South East Asian countries where urbanization and income increases have resulted in more away-from-home eating, including fast food such as burgers and pizzas.

The dominant use of skim milk powder and whole milk powder will continue to be in the manufacturing sector, notably in confectionary, infant formula, and bakery products.

Dairy Trade Projections
While some regions are self-sufficient in dairy, such as India and Pakistan, total dairy consumption in Africa, South East Asian countries, and the Middle East and North Africa is expected to grow faster than production, leading to an increase in dairy imports.

Approximately 8 percent of global milk production is trading internationally, primarily due to the perishability of milk and its high water content. However, imports of liquid milk by China from the European Union and New Zealand have increased considerably in recent years, the report pointed out.

China’s net imports of fresh dairy products are projected to increase over the projection period by 3.6 percent per annum.

The three major exporters of dairy products in the base period (2017-2019) are the EU, New Zealand and the US.

These three countries are projected to jointly account for around 65 percent of cheese, 68 percent of WMP, 76 percent of butter, and 77 percent of skim milk powder exports in 2029.

Australia, another exporter, has lost market shares although it remains a notable exporter of cheese and SMP, the report noted. In the case of WMP, Argentina is also an important exporter and is projected to account for 5 percent of world exports by 2029. In recent years, Belarus has become an important exporter, orientating its exports primarily to the Russian market.

The EU will continue to be the main world cheese exporter, followed by the United States and New Zealand, the OECD-FAO report projected.

It is projected that the European Union’s share of global cheese exports will be around 44 percent by 2029, sustained by increased cheese exports to Canada via the Comprehensive Economic and Trade Agreement (CETA) and to Japan following the ratification of the bilateral trade agreement last year.

The United Kingdom, Russia, Japan, the EU, and Saudi Arabia are projected to be the top five cheese importers in 2029.

New Zealand remains the primary source for butter and WMP on the international market, and its market shares are projected to be around 42 percent and 52 percent, respectively, by 2029.
In the case of WMP, trade between New Zealand and China, the principle importer of WMP, is projected to be considerably less dynamic over the projection period.

The expected growth in domestic milk production in China limits the growth in WMP imports. It is expected that New Zealand will diversify and slightly increase its cheese production over the outlook period.

Dairy imports are spread more widely across countries, with the dominant destinations for all dairy products being the Middle East and North Africa, developed countries, South East Asia, and China. China is expected to continue to be the world’s major dairy importer, particularly for WMP.
Most of its dairy imports come from Oceania, although in recent years the EU has increased its butter and SMP exports to China.

Imports by the Middle East and North Africa are expected to originate primarily from the EU, while the United States and Oceania are expected to be the main suppliers of milk powders to South East Asia.

Developed countries import a high level of cheese and butter, around 54 percent and 39 percent, respectively, of world imports in 2017-19. These percentages are expected to decline slightly by 2029.

Among the main dairy issues and uncertainties noted in the report are the coronavirus pandemic, unforeseen weather events, environmental legislation, plant-based dairy substitutes, changes in domestic policies, and changes to or the creation of trade agreements..

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