FAO/GIEWS - Food Outlook, November 1997

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MILK AND MILK PRODUCTS

Indicative dairy export prices for most dairy products were lower during the first nine months of 1997, compared to those prevailing in the same period of 1996; however, butter prices began to recover from the middle of the year and, since September, powder prices have also strengthened. Limited stocks and rising import demand are the two main factors behind the price rises. Acid casein prices continued to be affected by lower demand in the United States, the main market. Cheese prices, as has been the case in recent years, have stayed largely unaffected by changes in the value of other dairy products and remain around the U.S.$ 2 150 per ton/fob mark.

INDICATIVE DAIRY EXPORT PRICES 1/
1996  1997 
Sept.  July  Aug.  Sept.
( . . . . U.S.$/ton, f.o.b. . . . . ) 
Butter  1 425  1 450  1 500  1 575
Skimmed milk powder  1 750  1 685  1 625  1 675
Whole milk powder  1 825  1 675  1 650  1 700
Cheddar cheese  2 200  2 150  2 150  2 175
Acid casein  5 250  4 100  4 100  4 100
1/ Mid-point of price ranges reported by the New Zealand Dairy Board.

Global output of milk is expected to increase by 1 percent in 1997. After several years of stagnation, milk production has begun to emerge from the trough caused by the decline in output in the CIS and some eastern European countries.

Milk output in the developed countries as a whole in 1997 is expected to grow, albeit by a modest 0.4 percent, for the first time since 1990. The continuing decline in output in the CIS is expected to be more than offset by increased production in other countries. New Zealand in particular experienced an outstanding 1996/1997 season, when milk output rose by 12 percent. In Australia, although production at the end of the season was constrained by drought, milk output rose by 4 percent for the 1996/97 season overall. In both the above-mentioned countries, milk deliveries in the current flush period are running above those of the previous year and a 4 percent increase over the previous season is predicted. In eastern Europe production also grew in a number of countries. Poland, the largest milk producer in this group of countries, is expected to register a 3 percent rise in milk output in 1997. Mid-year cow numbers rose for the first time in a number of years and yield per cow is also expected to rise (from 3 264 litres per cow in 1996 to 3 340 litres per cow in 1997). The rise in Polish milk production has been stimulated by higher domestic prices. In the United States, milk production in 1997 is expected to grow only marginally, by 1 percent, over that of 1996. Growth has been constrained by a shortage of quality forage and an unfavourable milk-feed price ratio. Production in a number of other developed countries (the EC, Canada, Japan, Norway, Switzerland) is subject to production restrictions and, as a result, changes little from year to year. In the CIS, milk production continued to decline. This was largely a result of falling output in the two major producing countries - the Russian Federation and the Ukraine - where milk production for the first half of 1997 was down by 4 percent and 18 percent respectively. However, milk output in some of the smaller member countries, such as Belarus and Uzbekistan, rose. This latter fact, may signal that the fall in milk production for this group of countries as a whole is set to level out.

In the developing countries, growth was particularly strong in Asia and Latin America. In India, milk production in recent years has been stimulated by sustained farm-gate price rises, in part associated with the increased competition from private companies. Assuming normal weather conditions and an average rate of production increase, the 1997/98 (April/March) marketing year could see milk output rising to 71 million tons, placing India on par with the United States, the world’s largest milk producing country. 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 growth in their domestic markets.

Developments in international trade for dairy products during 1997 has been mixed. For cheese, the main importing countries maintained their level of imports. In the case of butter, a substantial increase in purchases by the Russian Federation over the previous year (imports in the first half of 1997 were 133 percent above those of the previous year) was the main factor behind rising demand on the international market. Following some substantial orders at the being of 1997, for example by Mexico, international demand for milk powder has been subdued for most of 1997. However, since September, demand for powder has strengthened and as a result international prices have increased.

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 . . . . . . .) 
Sept. '95  133  18  11
Sept. '96  200  127  0
Sept. '97 1 147  142  0
SOURCE: USDA, ZMP.
Note: At the end of the month.
1/ For the EC stocks as of 25 September 1997.

Public stocks of butter in the EC in September were below those of a year earlier due to strong demand from the internal market and significant growth in exports: butter exports for the first-half of 1997 are estimated to be up more than 120 percent over the same period in 1996. EC September skimmed milk powder stocks were marginally higher; however, they are not sufficiently large to have any depressing effect on the international market. In the United States, high domestic prices have resulted in the virtual absence of public stocks in recent years, although, as a result of increased production, skimmed milk prices were sufficiently low for some purchases to be made by the Commodity Credit Corporation (CCC) from May onwards. Total purchases up until the end of September have been on a relatively small scale (14 000 tons) and are not as yet classified as "uncommitted inventories"; i.e., stocks. Recovery in cheese prices in the United States are expected to limit further purchases of powder by the CCC, as low cheese prices in the early part of the year had led to milk being diverted into milk powder.

Milk output in 1998 is expected to show a small increase over the previous year, with changes in the major regions similar to those in 1997. Supplies of dairy products on the international market in 1998 should change little compared to the previous year. The current strengthening in dairy prices is expected to carry over into 1998 and to lead to average prices for dairy products overall being higher than in 1997. Public stocks of dairy products are not expected to grow substantially in 1998, and this should lend support to the positive price outlook.

MILK PRODUCTION
1996  1997 
estim. 
1998 
f'cast
(. . . . . million tons . . . . .) 
WORLD  539  545  555
EC  125  125  125
United States  70  71  72
India  68  71  74
Russian Fed.  36  35  34
Pakistan  20  21  22
Brazil  18  19  21
Ukraine  16  14  14
Poland  11  11  12
New Zealand  10  11  11
Australia  9
SOURCE: FAO
 
 
E-MAIL INFORMATION EXCHANGE SERVICE FOR THE DAIRY SECTOR 

The Basic Foodstuffs Service of the Commodities and Trade Division has recently established an e-mail based network for the exchange of information on developments in the world’s dairy industry. The service is call Dairy Bulletin and complements the Basic Foodstuffs Service’s Dairy Outlook e-mail newsletter, announced in Food Outlook, No. 1/2, 1997.  

The Dairy Bulletin allows registered users to send messages to one another utilizing FAO’s central e-mail server. The way the system works is that a user sends an e-mail message asking a question or making a comment, this is then sent by the FAO moderator to all the other members of the system who are free to respond: their messages in turn are channelled through the FAO mail server and sent to the other list members for information or comment. In this way, several messages are circulated through the system on any given topic. For example, a question posed by a member of the Dairy Bulletin list in South Africa regarding the comparative pricing of milk versus soft-drinks and fruit juice received replies from Uruguay, Peru, the United States, the United Kingdom, Italy, Kenya, India and Australia. The service began operating in mid-May 1997 and currently has 310 registered users spread throughout the world.  

To subscribe to the service (which is free-of-charge) leave the subject blank and type the following message:  

      subscribe Dairy-Outlook-L 
This should then be sent to: mailserv@mailserv.fao.org 


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