FAO-OECD anticipates dairy price recovery over next decade

Published 3 August 17

Global dairy prices are projected to increase from the 2016 low over the coming decade, according to the latest OECD-FAO global outlook report. Nonetheless, once inflation is taken into account, it is not thought that prices in real terms will return to the peak levels of 2013.

World milk production expected to increase 21% between 2016 and 2026, reaching 977Mt. The majority of this increase (77%) is projected to come from the developing nations, particularly India and Pakistan, as herd size and productivity increases. However, most of this is expected to be consumed domestically as fresh dairy products, with consumption of these products growing at 1.8% per annum in developing regions over the decade.

Nonetheless, global demand for processed dairy products is also expected to increase 1.7% per annum overall, supporting commodity prices. In developed regions, consumption growth for cheese and WMP is even expected to outpace the previous decade. However, in developing countries, with the exception of cheese, consumption growth for processed products is expected to be slower than previously. Nonetheless, expanding consumption is still expected to outpace production in the African, Asian and Middle-Eastern regions, increasing their import requirements over the decade.

Developed countries provide 82% of dairy exports, with this market share expected to grow slightly by 2026. The EU in particular is expected to benefit, holding 28% of the market by 2026, 4 percentage points more than in 2016. This follows from declining domestic demand for fresh dairy products, while milk production is still projected to grow 0.8% per annum. Increased exports will particularly be supported by cheese shipments. China and Egypt expected to double their cheese import requirements over the decade, while the EU will also be able to send more the Canada under the CETA agreement, and Russia after the import ban is lifted.