Explore the current trends in the global dairy market for 2024. How are changes in production and consumption impacting the industry? Gain essential insights from the USDA report.
Imagine starting your day without your favorite coffee creamer because it’s missing from store shelves. This scenario highlights the turbulent changes the global dairy industry faces in 2024. The world is on the brink of a dairy shift, driven by market dynamics, environmental conditions, and strategic moves by critical regions.
Join us as we analyse USDA’s Foreign Ag Service latest report and unpack the challenges confronting Argentina’s dairy industry, explore global milk production changes, and look at Australia’s booming cheese and skim milk powder markets. We also delve into Europe’s butter production hurdles and New Zealand’s focus on fresh dairy amid rising exports. These insights reveal why these shifts matter to producers, suppliers and consumers.
The Argentine Dairy Industry Faces Tumultuous Times in 2024
The Argentine dairy industry faces tough challenges this year, with the country’s economic crisis hitting hard. Inflation and government foreign exchange controls have severely impacted milk production, export competitiveness, and domestic consumption. Heavy reliance on domestic inputs like feed and machinery has increased the financial strain on dairy farmers, causing many to cut production or seek capital, often operating at a loss.
From January to June 2024, Argentina’s milk production fell by 13 percent compared to 2023. Forecasts suggest a 7 percent drop for the year, hitting 10.8 million tons. This decline in early 2024 has paradoxically led to a rise in milk prices, encouraging more production later in the year. Despite the long-term struggle with rising costs, a devalued peso has made Argentine dairy products more competitive globally, boosting export volumes by 10 percent in the first five months of 2024. Cheese exports, in particular, are expected to jump from 85,000 tons in 2023 to 100,000 tons in 2024.
Domestically, the situation remains challenging, with higher production costs leading to increased prices for dairy products. Many families struggle to afford these basics due to inflation, resulting in a forecasted 7 percent decline in domestic fluid milk consumption to 1.6 million tons in 2024. The industry faces a critical decision: focus on lucrative export markets or serve a price-sensitive domestic market.
In response, the Argentine government has introduced support measures, such as reopening agricultural export registrations and a blended exchange rate for exports, offering a more favorable rate for exporters. While these measures have been somewhat effective, the broader economic environment presents significant hurdles. Annualized inflation for food and non-alcoholic beverages, including milk, stands at nearly 300 percent, limiting growth in domestic dairy demand.
Shifting Paradigms in Global Milk Production: Australia’s Rise as Argentina and New Zealand Face Challenges
Argentina’s fluid milk production is forecast to decline by approximately 7 percent in 2024, hitting 10.8 million tons. This dip is due to macroeconomic challenges, such as a weakened peso and high inflation, leading to higher production costs. Reduced herd sizes and limited feed availability further worsened the situation. However, improvements are expected later in the year due to better margins from disinflation, improved weather, and temporary export restriction removals encouraging herd expansion.
Meanwhile, the European Union’s milk production in 2024 remains unchanged primarily, as increased output per cow is offset by a declining dairy herd. The herd has now dropped below 20 million, driven by lower milk prices, high production costs, environmental regulations, and generational renewal issues. Although larger farms are better at maintaining herd sizes, smaller, less efficient farms exit the market, leading to milk production constraints.
New Zealand’s fluid milk production is expected to decline by 0.7 percent to 21.1 million tons in 2024. A shrinking herd, the El Niño weather pattern, and high debt servicing costs are critical factors for the decline. Moreover, the sector faces challenges with softening revenue and high input costs. Despite this, investments in processing facilities are shifting focus from milk powder to value-added products like butter, cheese, and cream. With 95 percent of milk production exported, trade agreements bolster strong demand for New Zealand dairy products, especially with China.
Australia’s Booming Cheese Production: A Forecast for 2024
Australia’s cheese production is expected to hit 435,000 tons in 2024, thanks to higher milk supplies and strong profitability. Despite rising input costs, Australian dairy farmers continue to thrive through tech investments and efficient practices. Domestic consumption remains robust at 380,000 tons, with a strong preference for local cheese. The surplus of about 165,000 tons will be exported, primarily to Japan, China, and Southeast Asia.
In the EU, cheese production is set to increase by nearly 1 percent to approximately 10.5 million tons in 2024. The boost comes from domestic solid consumption and steady export demand. The major contributors are Germany, France, Italy, the Netherlands, and Poland. EU cheese exports are expected to grow by 1 percent to 1.4 million tons, with key markets being the UK and the U.S. Domestic consumption is accelerating, driven by economic recovery and the tourism sector’s resurgence. Germany, France, Italy, Poland, and Spain are the leading cheese-consuming countries.
New Zealand’s cheese production in 2024 is projected at 375,000 tons, thanks to recent investments in processing facilities. With modest domestic consumption at around 40,000 tons, most of their cheese—about 350,000 tons—is exported to markets like China, Japan, and Australia. The focus is on diversifying into soft cheese varieties like brie, blue cheese, and gouda.
The U.S. cheese export outlook for 2024 is promising: it is anticipated at 466,000 tons, an 8 percent increase from 2023: new production capacities and firm performance in the year’s first half support this growth. However, the recent rise in U.S. cheese prices is forecasted at $1.97/lb. In Q3, it was $1.93/lb. In Q4, competitiveness might be challenged in the latter half of the year. Oceania cheese prices are also expected to moderate after hitting $1.97/lb in July.
European Union Butter Production: A Setback Amid Tightening Milk Supplies and Changing Consumer Preferences
Butter production in the European Union (EU) is set to drop by just over 1 percent in 2024. This decline is driven by limited milk supplies, prompting dairy processors to focus on more lucrative cheese production. Key EU butter producers like Germany, France, Ireland, Poland, and the Netherlands are all expected to decrease output. The trend of reduced butter production was evident early in the year, showing a 4-percent dip compared to the same period in 2023.
EU domestic butter consumption is also on a downward trend. Health concerns and a shift towards plant-based spreads, especially in Mediterranean countries, are significant factors. This shift is expected to lead to a 3 percent reduction in butter consumption compared to 2023.
Butter exports from the EU are forecasted to decline in 2024 due to reduced production and stiffer global competition. Early data indicates a 4 percent drop in exports through May, with the overall yearly forecast at 280,000 tons. Rising farm-gate milk prices are making EU butter less competitive, causing a contraction in export volumes.
In contrast, New Zealand’s butter production is expected to rise slightly to 525,000 tons in 2024, bolstered by new processing facilities focused on high-value products like grass-fed butter. However, New Zealand’s butter exports are forecasted to decrease to 495,000 tons due to economic pressures like high debt servicing and fluctuating feed prices.
Despite early declines, demand for New Zealand butter remains strong in key markets such as China and the United States. Anhydrous Milk Fat (AMF) exports from New Zealand are performing well, showing a 24 percent increase year-to-date, reflecting robust global demand for high-value dairy products.
China’s butter imports are rising, driven by higher domestic consumption, especially in sectors like bakeries, yogurt, ice cream, and food services. The first half of 2024 saw a 10 percent increase in butter imports, mainly from New Zealand and the EU. Despite a slight uptick in domestic production, the quality is often insufficient for premium uses, maintaining China’s reliance on imports for high-end applications.
Australia’s Skim Milk Powder Production Soars Amid Global Shifts in 2024
In 2024, Australia’s skim milk powder (SMP) production is set to rise to 170,000 tons, a 17 percent increase from 2023. This growth is driven by higher milk production, which means processors need to manage larger milk volumes during peak periods. Additional SMP aligns with the increased milk supply. Exports are also expected to grow, reaching 160,000 tons, up 20 percent, with key markets being China, Indonesia, Vietnam, Thailand, Malaysia, and Saudi Arabia.
Conversely, SMP production in the EU is forecast to decline slightly as dairy processors focus more on the higher returns from cheese production due to lower farm-gate milk prices and higher production costs. Furthermore, EU exports are expected to drop with increased global competition and enhanced local production in their key markets.
The U.S. has faced challenges this year with SMP exports. They were down 11 percent through May, with forecasts indicating an over 8 percent drop to 741,000 tons. This decline is primarily attributed to weaker Southeast Asian demand and increased competition from countries like New Zealand. While U.S. SMP exports may improve in the latter half of 2024, they are unlikely to recover fully, given competitive pricing from Oceania.
New Zealand’s Strategic Shift in Whole Milk Powder Production for 2024: Embracing Fresh Dairy Products Amid Rising Exports
In 2024, New Zealand’s production of whole milk powder (WMP) is projected to decline slightly to 1.375 million tons. This decrease is attributed to a strategic shift by dairy processors towards producing fresh dairy products such as butter, cheese, and cream, which currently offer higher returns. The New Zealand dairy industry continues to invest in enhancing processing capacity for higher-value products to maximize returns in a competitive global market.
Despite this decline, exports are set to rise to 1.45 million tons, driven by strong demand from Southeast Asia and the UAE. Additionally, the first quarter of 2024 witnessed a 32-percent export increase, boosted by recovering global dairy trade prices. This growth reflects New Zealand’s strategic investment in high-value dairy products, aiming for sustainable profitability in a competitive market.
China’s WMP production is also expected to increase due to surplus raw milk being diverted for powder production. Yet, profitability remains challenging, prompting processors to minimize raw milk purchases for WMP. Provincial subsidies are helping, but the overall growth will be modest compared to previous years as pandemic-driven consumption levels wane.
Improving domestic quality reduces China’s reliance on imports, pushing down demand for foreign WMP. Enhanced production capabilities and significant carryover stocks further diminish the need for imports, reflecting shifting dynamics in China’s dairy market.
The Bottom Line
The global dairy industry in 2024 faces both challenges and opportunities. Due to economic pressures, smaller herds, and lower feed availability, Argentina’s milk production declines. In contrast, Australia experiences a boom in cheese and skim milk powder production, driven by a stable currency and improved farming practices. The European Union grapples with tighter milk supplies and changing consumer preferences, impacting butter production. New Zealand shifts towards fresh dairy products amid a shrinking herd and external pressures. These trends underline the interconnectedness of global dairy markets. Australia’s resilience contrasts with Argentina’s vulnerabilities, while the EU’s situation highlights the balance needed between environmental goals and economic viability. New Zealand’s pivot shows the importance of adaptation for a competitive edge. The ongoing changes affect global supply chains and prices, making it essential for farmers, analysts, and policymakers to stay informed and adaptable.
Key Takeaways:
- Argentina’s dairy industry faces significant challenges in 2024 due to economic instability and reduced herd sizes.
- Australia is experiencing a resurgence in milk production, supported by efficient farming practices and technological investments.
- Cheese consumption and production are on the rise globally, particularly in Australia, driven by increased incomes and recovery in tourism.
- EU butter production is projected to decline due to tight milk supplies and shifting consumer preferences.
- Australia’s skim milk powder production is set to increase, reflecting broader changes in the global dairy market.
- New Zealand is pivoting towards producing fresh dairy products, while its milk production is forecasted to decline.
Summary:
The global dairy industry faces challenges in 2024 due to market dynamics, environmental conditions, and strategic moves. Argentina’s dairy industry faces an economic crisis, inflation, and government foreign exchange controls, leading to a 13% drop in milk production. However, a devalued peso has made Argentine dairy products more competitive globally, boosting export volumes by 10%. Domestically, higher production costs have led to increased prices for dairy products, resulting in a 7% decline in domestic fluid milk consumption to 1.6 million tons. The Argentine government has introduced support measures to help exporters. Australia’s fluid milk production is projected to reach 8.8 million tons, a 3.5% increase from 2023, due to favorable weather and improved pasture availability. Argentina’s production is forecast to decline by approximately 7%, reaching 10.8 million tons.
Learn more:
- Global Dairy Trade: Key Insights Every Dairy Farmer Should Know
- Is 2024 Shaping Up to Be a Disappointing Year for Dairy Exports and Milk Yields?
- How Cheese Exports and China’s Demand are Powering the US Dairy Economy in 2024
