US cuts its dairy export growth projections by half, blames aggressive EU production

The US has cut its export growth projections for its dairy industry by 50%, from 6.5% to 3.7% according to its latest projections.

The US Dairy Export Council’s mid-term market analysis, ‘US Dairy Export Prospects: Looking out to 2020’, found that population growth, economic expansion and the subsequent enlargement of the world’s middle class will drive global dairy trade from 9.4m tons of finished product in 2014 to 11.7m tons in 2020.

It says that trade in each major product category – whole milk powder (WMP), nonfat dry milk/skim milk powder, cheese, whey protein and butterfat – will rise at compound annual growth rates (CAGR) of 3-5%, depending on the product.

Growth in disposable income and population will continue to fuel global dairy consumption at a far faster rate in emerging economies than in developed countries, creating opportunities for nations with the capacity and competitive wherewithal to serve their needs, it says.

However, at the same time, the US Dairy Export Council’s research says there is a market shift.

“We are facing a significantly altered competitive landscape. Over the mid term, we continue to see attractive dairy export growth opportunities, but growth will be slower than recent years, and fiercer competition means US exporters cannot expect to succeed by default.”

From 2007 to 2013, global dairy trade volume rose at a compound annual growth rate of about 6.5%.

But, now the US Dairy Export Council is saying that 6.5% growth is not likely up to 2020 and that growth of 3.7% is more realistic.

“In other words, dairy exports will still grow, but not as quickly as before.”

It also says that New Zealand and, in particular, the European Union have invested heavily in capitalising on global dairy demand growth projections.

Key producers in the EU have moved aggressively to expand dairy exports, it says, and with a half-percentage-point gain in EU milk production equal to 5.5m additional tons of milk (equivalent to 713,000 tons of WMP or 592,000 tons of cheese) the EU has the scale to turn a favorable dairy export market into a harsh one.

The bottom-line message, it says, is that the US needs to step up its game and compete harder to take advantage of continued gains in emerging-market dairy demand.