Global dairy ingredients market outlook remains positive

by Editorial Staff
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AARHUS, DENMARK — The global market for milk ingredients has changed and moved into a new period of supply and demand imbalance with resulting price volatility, according to a report about the global milk ingredients market from 3A Business Consulting called "The World Market for Milk Ingredients 2008-2011." Despite the current build-up of stocks and consumer pessimism there are signs of milk supply reductions that will rebalance the market and provide the stimulus for future volume and value growth, the report said.

Global production of milk ingredients is estimated to have risen from 7.5 million tonnes in 2005 to 8.2 million tonnes in 2008, an annual average growth rate of 3%, according to the study. But in terms of value, the market is down significantly as commodity prices have fallen by approximately 40% to 50% from their peak in the summer of 2007.

The prices of the higher added-value milk ingredients, for example milk protein isolates and milk protein hydrolysates, have not shown the same volatility as the commodities whole milk powder (W.M.P.), skim milk powder (S.M.P.), casein and caseinates.

3A Business Consulting predicts price fluctuations are likely to continue in the short to medium term. The two-year surge in dairy commodity prices between 2006 and 2008 is even more remarkable considering the rapid speed of reversal, according to the report. At their highest prices, W.M.P., S.M.P., casein and caseinate were two to three times higher than the historical price average. The high prices led to a fall in demand that, combined with the global economic crisis, led to year-on-year prices in January 2009 in the United States that were down 38% for W.M.P., 45% for S.M.P. and 42% for casein.

Despite the current oversupply situation, the main drivers for dairy still remain intact, according to the report. The world’s population continues to grow, living standards in the long term are improving, dairy consumption is increasing, especially in Asian-Pacific countries, and consumers increasingly are motivated to buy products that fit within the health and wellness trend.

The long-term factors are not expected to be enough to offset the effects of the slump in gross national product output in 2009. The current imbalance between supply and demand has resulted in increases in stocks of milk commodities in early 2009. With these factors in mind, the study’s authors predict prices will begin to recover in late 2009 and into 2010.

World trade of milk ingredients has grown an average of 1% per year between 2005 and 2008. Oceania, which consists of Australia and New Zealand, the European Union and the United States continue to be the largest suppliers, exporting approximately 1.3 million, 680,000 and 430,000 tonnes of milk ingredients, respectively.

Over the past few years, the United States has shifted from being a domestic- to an export-oriented supplier of dairy ingredients. The report’s authors said the continued development of U.S. milk production is likely to result in the country continuing to play a bigger role on the export market, particularly in dairy commodities.

The report provides an overview of the current and expected future global market for milk ingredients. The Asia-Pacific region is the largest net importer globally of dairy ingredients, importing over 1.1 million tonnes of milk ingredients in 2008. Imports to the region have risen approximately 3% annually between 2005 and 2008.

Latin America is the second largest importer, importing an estimated 390,000 tonnes in 2008. Imports of milk ingredients have grown on average by 4.5% per year during the period. The report’s authors note that Latin America is moving toward being more self-sufficient. Growing regional milk production is allowing processors to fill local demand and also to export increasing volumes of bulk dairy commodities onto the world market.

For more information about the report, contact Tage Affertsholt of 3A Business Consulting at +45 70 21 00 98, e-mail ta@3abc.dk, or visit the company’s web site at www.3abc.dk.

This article can also be found in the digital edition of Dairy Business News, April 2009, starting on Page 6. Click here to search that archive.

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