With European milk production returning to more sustainable growth levels this year, global dairy markets are slowly beginning to rebalance and prices for most commodities are firming.With the exception of skimmed milk powder, the volume of all dairy products traded globally in 2016 has increased, which would indicate a healthy state of demand. Key importers such as China, Russia, USA and Brazil have all imported more dairy product this year.
With European milk production returning to more sustainable growth levels this year, global dairy markets are slowly beginning to rebalance and prices for most commodities are firming.
With the exception of skimmed milk powder, the volume of all dairy products traded globally in 2016 has increased, which would indicate a healthy state of demand. Key importers such as China, Russia, USA and Brazil have all imported more dairy product this year.
This strong level of import trade, coupled with the slowdown in European milk production, has been the catalyst for the growth in dairy commodity prices since May.
European butter exports for the first seven months of 2016 are currently running at 34% ahead of where they were last year in volume terms, while cheese exports in the same period are 13% ahead year-on-year.
However, it is important to note that many of the EU’s key markets for cheese and butter remain highly challenged in terms of low oil prices and currency depreciation. The big question remains how sustainable the import demand in some of these markets will remain now that prices are on the rise.
Have these countries simply been drawn into the market by cheap dairy product prices or is there a sustainable level of demand there? If the rally in dairy markets is to be sustained, volumes shipped to these countries will need to hold up, despite the rising prices.
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