IDF report: The World Dairy Situation 2010

2009 showed a mixed picture: a stagnating first half year and a strong recovery during the second part. 2010 looks much more balanced: demand is steady and production development is moderate.

For many dairy farmers and companies 2009 was a remarkable year. The financial crisis in the global economy caused international demand for dairy produce to decline in late 2008 and had a dramatic impact on product prices during the first half year of 2009. For the first time since the mid-nineties global consumption per capita declined. The financial crisis impacted on every aspect of the dairy business: production, trade, consumption and prices. The general trend was stagnation but it turned out different per region. Chinese non-skimmed milk powder (WMP) demand in the second half year was a key driver of rising dairy commodity prices and recovery of the world dairy market. Asia acted as an engine for the global dairy industry.

As a consequence of the general recession, most companies experienced a decrease in their turnover in 2009 primarily due to the sharp decrease in product prices. But this situation certainly does not hold for every company and every country. China is an exception. A number of Chinese companies showed remarkable growth and the Chinese dairy processing industry started to invest abroad.

Growth of world milk production slowed down in 2009. Low milk prices and high input costs discouraged many farmers around the globe. Meanwhile buffalo milk production is still growing at a higher pace than cow milk production.

During the first half-year of 2010 prices recovered. This recovery will stimulate milk production for the rest of the year.

World output for dairy produce increased last year for all products except for WMP. This is remarkable since production of WMP increased steadily between 2000 and 2008. The decline resulted from a huge drop in milk production in many parts of the world, including China. World butter production kept growing in 2009,

mainly due to India. World cheese production developed slowly. For the second consecutive year production of skim milk powder (SMP) showed strong growth, whereas production had been stable at the beginning of the decade.

World dairy trade increased rather slowly during the first part of 2009 but showed a remarkable recovery during the second part, led by Chinese imports. China’’s solid demand for foreign produce, following the melamine crisis, coincided with the generally low price levels that were typical for international markets during most of 2009.

World trade is still not more than 7% of world production but it is increasing. Chinese buying accounted for most of the increase in international dairy trade growth in 2009. The driving force was trade in WMP.

Beyond 2010 milk production is expected to grow on average by more than 2% annually during the next decade; Asia will account for most of it.

In conclusion: 2009 showed a mixed picture: a stagnating first half year and a strong recovery during the second part. 2010 looks much more balanced: demand is steady and production development is moderate.