FAO/GIEWS - Food Outlook 97/01

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MILK AND MILK PRODUCTS


Average dairy export prices for most dairy products dropped during 1996 from the previous year’s level, i.e. by 6 percent for butter and skimmed milk powder (SMP) and by 5 percent for whole milk powder (WMP). Reduced prices mainly reflected a fall in demand in a number of important importing countries. The price trend for cheese was an exception to the general pattern: for this commodity average export prices were 2 percent higher, largely due to a reduction in the volume of subsidised exports by the European Union (the main exporter) as a result of Uruguay Round commitments. For 1997, an increase in demand and the reduced presence of subsidised exports are expected to lead to a general strengthening of international prices for milk products.

INDICATIVE DAIRY EXPORT PRICES 1/


1996

March June Sept. Dec.

( . . . . U.S.$/ton, f.o.b. . . . . )
Butter 1 950 1 675 1 425 1 400
Skimmed milk powder 2 000 1 875 1 750 1 900
Whole milk powder 2 050 1 918 1 825 1 850
Cheddar cheese 2 075 2 125 2 200 2 150
Acid casein 5 525 5 300 5 250 4 950












1/ Mid-point of price ranges reported by the New Zealand Dairy Board.

Global output of milk again changed little in 1996. After several years of stagnation, early indications would suggest that world production will start to move upwards in 1997, as the decline in output in the CIS is expected to be more than counterbalanced by growth in milk production in other countries.

MILK PRODUCTION


1995 1996 estim. 1997 f'cast

(. . . . . million tons . . . . .)
WORLD 528 533 539
EC 124 125 125
United States 71 71 71
India 65 67 70
Russian Fed. 39 35 32
Pakistan 18 19 20
Brazil 17 18 19
Ukraine 17 16 15
Poland 11 12 13
New Zealand 10 10 11
Australia 8 9 9



















SOURCE: FAO


Milk output in the developed countries as a whole in 1996 remained at levels close to those of the previous year. Production in the CIS declined sharply; it also dropped in the United States as profitability was affected by high feed prices. Milk output in the European Union and in other western European countries remained stable, reflecting quota restraints. In contrast, output rose in several eastern European countries, including Poland, indicating that the sector may be recovering from the consistent declines in output registered since 1990. In Japan, milk production rose by 4 percent as a result of weather conditions favourable for pasture growth - a factor which played an important role in the growth in milk output in Oceania, especially in the latter part of the season. In fact, milk production in the previous season rose by 8 percent in New Zealand and by 5 percent in Australia.

In developing countries, growth was particularly strong in Asia and Latin America. In India, production during the last marketing year was constrained as a result of poor fodder availability in some regions. Should output resume its historical trend, total milk production in India could reach 67 million tons in the current marketing year. Growth in Indian milk production has been sustained by an expansion in internal demand. Many Latin American countries also saw milk output expand as a result of increased demand from their domestic markets. In some countries, rising demand in the region as a whole also stimulated trade, especially amongst members of the Mercosur (Argentina, Brazil, Chile, Paraguay and Uruguay), with Brazil being the main market.

On the whole, international trade in dairy products weakened during 1996. In the case of butter, the Russian Federation, the main importing country, was estimated to have imported only half the volume of 1995. For skimmed milk powder, imports by the three main importing countries - Mexico, Algeria and Japan - were all lower than in the previous year although this was partially offset by increased imports by the Philippines, Malaysia, Thailand and Indonesia. In the case of whole milk powder, Brazil and Algeria, the two main importing country, both imported less; however, import demand remained firm amongst South East Asian countries. For cheese, the main importing countries maintained their level of imports, and import demand by the Russian Federation remained strong.

PUBLIC STOCKS OF BUTTER AND SKIMMED MILK POWDER IN THE EC AND USA


European Community United States

Butter Skimm. milk powder Butter Skimm. Milk powder

(. . . . . . . thousand tons . . . . . . .)
Dec. '94 118 73 18 13
Dec. '95 70 8 0 6
Dec. '96 1/ 105 111 0 0









SOURCE: USDA, ZMP.
Note: At the end of the month.
1/ For the EC stocks as of 12 December 1996.

Public stocks of butter and skimmed milk powder in the European Union rose substantially during the year, reflecting reduced export sales and diminished use of subsidised disposal schemes within the Union. In the United States, high domestic prices resulted in the virtual absence of public stocks of dairy products during 1996.

Milk output in 1997 is expected to show a small increase over the previous year, with changes in the major regions similar to those in 1996. Supplies of dairy products on the international market in 1997 should change little compared to the previous year. As a result of increased demand, prices are expected to rise, supported by Uruguay Round commitments to reduce subsidised exports of milk products, principally by the European Community and the United States.


NEW INFORMATION SERVICE ON THE DAIRY SECTOR

The Basic Foodstuffs Service of the Commodities and Trade Division has recently introduced a regular e-mail newsletter (currently monthly) on developments in the world’s dairy industry. The newsletter is entitled Dairy Outlook and areas covered include:

  • market commentary;
  • production and trade data;
  • international export prices;
  • new dairy products;
  • country specific developments.

Users are invited to enhance the scope of the information provided by supplying reports on developments in the dairy sector in their own countries/regions.

To subscribe to the service (which is free-of-charge) leave the subject blank and send the following message to: mailserv@mailserv.fao.org
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