This is a subscriber-only article
For the past two years, milk supply has exceeded demand. However, IFCN is now estimating that on an annual basis, milk demand will exceed milk supply. Although this was not the case for the first five months of this year, it is expected to arise later in 2016.
The analysis of the world milk supply based on IFCN researchers’ estimates show that milk supply will grow by 1.5% in 2016. Meanwhile, IFCN estimates growth in milk demand to be at a level of 2% this year.
Supply growth is therefore substantially slower than in 2015 (+1.8%) and 2014 (+3.2%).
Milk demand growth in 2015 was estimated by IFCN to be between 1.8% and 2%. This growth was lower than the long-term average of 2.4% per year between 2006 and 2015.
US milk production projected to increase
The June World Agricultural Supply and Demand Estimates report (WASDE) issued by the US Department of Agriculture projects an increase in milk production for both 2016 and 2017.
The increase of approximately 1% each year is coming from an increase in cow numbers, as there is no increase in output per cow.
US marketers are hoping that home consumption continues to increase as US fat and protein prices are higher than world prices at present.
Fat and skim export forecasts for 2016 and 2017 are lowered as international supplies of dairy products remain abundant and US prices remain high relative to those of their competitors. Fat and skim stocks are forecast higher as stocks of butter and cheese are expected to remain relatively high. Fat base imports forecasts are reduced for both years on expectation of slower imports of butterfat products and cheese to a lesser extent.
Infant formula demand expected to rise
Demand for infant formula, meanwhile, is also forecast to increase this year. According to analysts from Future Market Insights, infant formula demand is to grow by 9.3% in 2016, reaching US$ 24.5bn.
The market in north America and western Europe will grow at 5.9% and 7.1%, respectively.
In developing regions, growth is also predicted to be strong, with Asia Pacific Excluding Japan (APEJ) and the Middle East and Africa growing at 11.8% and 10.1%, respectively, in 2016.
Starting milk formula will remain the most attractive, growing by 9.7% in 2016 to reach US$11.6bn in revenues.
While birth rates continue to decline globally, the number of births remains high in developing countries.
APEJ will continue to be the largest market for infant formula in 2016, representing a 46.0% revenue share of the market, and China will dominate again, accounting for nearly 90% of this.
The global infant formula market is highly consolidated, with the top five players Nestlé SA, Groupe Danone, Abbott Nutrition, Mead Johnson Nutrition and The Kraft Heinz Company accounting for around 60% share of the global market.
The global infant formula market is expected to expand at a compound annual rate of more than 10% for the next decade and surpass US$ 64bn in revenues.
Additional reporting John Boylan.
SHARING OPTIONS: