Milk

Situation of Cow’s Milk on the Global Market

 The point in 2003
 Production

In 2003, worldwide milk production reached 600 million tons, an increase of 0.6% compared to 2002, and of 11.5% compared to 1995. This production was comprised of 84% cow’s milk (approximately 500 MT), 12% buffalo milk (mainly India and Pakistan), and 4% other milk (sheep, goats, horses).

1000T Total Production
EU 147.5
India 87
United States 77
Russia 33
Pakistan 28
New Zealand + Australia 25 (14.5 + 10.5)
Brasil 23.5
China 18.5

The growth of dairy production is primarily due to increased production in South-East Asia (India, 2nd, and China 7th), Latin America (Brazil and Argentina), United States until just before 2003, and Oceania, before the drought of 2003-2004. The EU (first producer) and Canada are subject to the quota policies, preventing them from increasing their production.

Growth per year Part engaged in global trade
Butter Stable 10%
Whole milk powder 2.5% 60%
Skim milk powder Stable 30%
Cheeses 2% – than 10%
Marketplace

Among the 600 MT of milk produced in 2003, only 7% (42 MT) is brought to the world market to be exchanged. This is figured in millions of tonnes of equivalent milk, that is to say for a tonne of milk powder exchanged, one counts the amount of milk needed to manufacture this tonne.
Most of these exchanges focus on derived dairy products (butter, milk powder or cheese) whose shelf life is relatively long.

2007 – The Turning Point¹

For the first time in many years, 2007 saw its world surplus of cow milk reduced to zero, the supply was equal to the demand (contrary to previous years when the supply was higher). This situation is explained by several factors such as climate, politics and economy:

  • In Australia, a drought (without precedent for more than a century) prevented the formation of stock fodder for the winter, a direct consequences being a decrease in milk production and the death of many herds.
  • In Argentina, major floods swept the plains of the Pampas, the main feeding areas of dairy cows, causing a reduction of milk production. At the same time, the government established taxes on dairy exports, decreasing the Argentinian supply to the worldwide market.
  • Same situation occurred in India, the largest producer of cow milk in the world, where the government taxed the exports.
  • With the world population growing a bit more each year (1.3% on average), the demand for basic foods such as milk increases.

A direct consequence of a supply equal to demand is the rapid increase in dairy prices, whether for the milk itself or its derivatives. The price of one tonne of butter skyrocketed from 2500 euros in January 2007 to 4150 euros in September 2007 (before dropping back below 3000 euros in March 2008). These important and sometimes unpredictable fluctuations require producers to invest (often heavily) to deal with these events. These sudden rises and falls can bankrupt many farms, which very generally will not return to the market.
If higher prices are often synonymous with higher incomes for producers, we must also take into account the cost of production (energy, fertiliser, etc.). This has also increased since 2000, increasing by an average of 3% per year (between 0.7 and 5% depending on the year).

Situation in France and in Europe over that Period

In France (number two producer after Germany), reflecting what happened in most European countries, the number of producers was at its lowest level in many decades (90,000 producers in 2008, compared to 130,000 in 1998). Despite increased average production per farmer at the same period, the low cost of milk until 2006 did not entice producers to increase production, once again reducing the supply available on the market in 2007.
In 2007, the increasing demand for milk of emerging countries (associated with the increased purchasing power of these countries) combined with a reduction in supply, did not significantly increase the price of milk.

€/1000 L 2004 2005 2006 2007 2008
France 287 280 268 288 342
Germany 281 279 275 338 352

¹based on the study by: Richard A. (2008). Le contexte laitier mondial en 2007 : une année mouvementée pour le lait de vache. Fourrages, 196, 395-399

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