The European and US dairy markets are leading international recovery in milk markets, the International Dairy Federation (IDF) report revealed.

According to the World Dairy Situation Report 2017, which was launched at the World Dairy Summit in Belfast this week, milk prices are now sitting back up at around the 10-year average.

While the latest figures showed butter prices approaching record highs, Veronique Pilet, editor in chief and head of economics at French Dairy organisation CNIEL, said skimmed milk prices continued to weaken.

The global dairy market remains uncertain and the only thing that we can say for sure is the volatility, which is a result of supply and demand issues, is here to stay.

“Dynamism in the European and US markets is leading recovery and production prospects over the next few months remain good. Butter prices are at an all-time high; however, skimmed milk powder prices are still eroding,” she said.

Increase in demand

Pilet said that recovery this year had followed a period when both global dairy production and consumption were stagnant – and in some areas even showed a slight decrease.

Contributing factors included the Russian ban on EU dairy imports, decreasing purchasing power in oil-producing countries and the economic situation in some South American countries.

New Zealand remains the world’s largest exporter of dairy with a 29% share of the market, closely followed by the EU at 28% and the US at 24%.

Overall, milk production rose by 0.9% in 2016 compared with growth rates of 2% and more in recent years.

Meanwhile, over the same period demand for dairy products had continued to increase at around 2% a year – mainly driven by the world’s growing population and increased consumption in the USA, China and India.

“Historical lows are giving way to a period of recovery,” Pilet added. “And we are now seeing a stronger demand for dairy in 2017.”

Overseas markets

The report showed self-sufficiency in dairy products had dropped in South America and Africa between 2010 and 2016 paving the way for milk-exporting countries to make gains.

Unsurprisingly, with the ending of Europe’s milk quota system, the EU countries’ self-sufficency increased from 107% to 112% over the same period.

The highest milk price was seen in Russia at 41.96 USD/t (€36/t) compared to the lowest in Argentina which received 25.44 USD/t (21.82/t). It compares with the EU average at 31.46 USD/t (€26.99/t).