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Global Dairy Trends

Global Dairy Prices

Strong dairy demand has supported buoyant prices of late, with the Global Dairy Trade (GDT) index recording price highs not seen since March 2014. China has been the key driver of dairy demand, with imports in April alone expected to be up almost 30% on April 2020. Chinese dairy imports rose 16% in 2020, and as of the end of April estimated figures suggest they are up a further 30% for the first four months of this year when compared to last year.

A declining birth rate in China remains a concern, with recently published stats showing there were 6 million fewer babies born in 2020 than 2016. However, Chinese consumers are looking to dairy products with immune boosting principles, and the rising global demand for electronics and other consumer goods has bolstered the Chinese economy pushing more people into the middle-class.

New Zealand is the main source of Chinese dairy imports, and accounted for 35% of total imports in 2020. Higher freight prices as a result of congestion at some western ports and difficulties in sourcing containers has allowed New Zealand to take advantage of their close proximity to China, which helped drive GDT prices higher in quarter one this year.

Global Dairy Supply – May/June 2021

Global dairy prices remain firm due to a shift in the supply:demand balance in favour of dairy exporters.

Europe is the world’s largest dairy exporting region accounting for 40% of total global dairy exports. France and Germany are Europe’s two largest milk producers, together accounting for 35% of the total European milk supply. Poor weather conditions and rising feed costs have hampered supply in France and Germany so far in 2021, and despite supply growth in Italy (2%),  Poland (2%) and Ireland (+10%) who account for 21% of supply collectively, total European milk production was back 1.4% for the period January to March (quarter one).

Beyond the EU

New Zealand accounts for 30% of total dairy exports globally. Milk production growth has recovered since the turn of the New Year in New Zealand as farmers experience near perfect weather conditions and the highest milk price received in some years.  Although volumes are seasonally low at this time of the year in the Southern hemisphere – their production season is June-May, peaking in October – April production was up 11% on April 2020 taking year to date production to +4% on 2020. 

The US is a major exporter and accounts for approximately 20% of total dairy exports. US cow numbers are at historically high levels, and despite higher feed costs beginning to pinch margins, milk supply for the year as of the end of April was up 2.1%.

Despite accounting for smaller export volumes, all of the other major exporting regions (mainly Australia, Argentina, Brazil, Uruguay) are in year on year growth with global milk supply predicted to be up 1.3% this year. 

Consumer trends shaping demand for Irish dairy

Evolving consumer trends presents an opportunity for Irish dairy, as shoppers are increasingly making purchasing decisions based on transparency, health and nutrition. By virtue of our system of production and Irish dairy farmers commitment to the Sustainable Dairy Assurance Scheme, Irish dairy products have the proof points in place to meet consumer expectations about where their food comes from and how it has been made.

At the Bord Bia Dairy Markets Seminar in April, Lu Ann Williams, Global Insights director at Innova insights, stated that “consumers are now, more than ever, looking for transparency in the products they buy”. Transparency refers to being open and honest with consumers in terms of food sourcing, ingredient lists, nutritional information and environmental impacts.

The Sustainable Dairy Assurance Scheme allows the dairy industry to substantiate the environmental impact of Irish dairy products, and gives consumers the confidence in the food and drink they buy.

Health and Nutrition is an ever growing trend, and our grass fed system of production provides a unique point of difference for Irish dairy. The benefits of grass fed dairy is not limited to environmental sustainability, Teagasc research has shown that grass fed dairy is also superior in terms of taste and nutrition, the importance of which are expected to continue influencing consumer purchasing decisions.

Grass fed milk has significantly higher levels of milk fat and protein compared to total mixed ration (TMR) systems, and Irish dairy farmer’s ability to maximise the amount of grazed grass in their cow’s diet will continue to be key in providing a point of difference relative to our competitors in terms of taste and quality. Grass fed milk contains a significantly higher level of beneficial nutrients, including vitamin A precursor, ß-carotene and minerals, including calcium, phosphorus, magnesium and manganese and has a two-fold increase in conjugated linoleic acid and significantly higher concentrations of omega-3 fatty acids.

These trends along with many others have been accelerated over the course of the Covid-19 pandemic, as consumers increasingly look to food that not just meets their taste expectations, but matches their personal beliefs also.