Global dairy outlook – markets and production

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Milk production in Latin America has increased 3.3% in H1 2022. Photo: Canva
Milk production in Latin America has increased 3.3% in H1 2022. Photo: Canva

Milk supply continues to be extremely fragile across the world with a variety of reasons causing the current crisis. Prices have continued to move upwards since the start of the year.

Europe and UK

Inflation was already rampant in the post-Covid economy and the war in Ukraine has significantly increased the pressures that are impacting farmers throughout Europe. Among the biggest EU producing regions, France, Germany, Benelux, and southern Europe were impacted the most while the situation remained relatively positive in Poland, Ireland, and Denmark.

In the UK, fertiliser costs have gone up from £315/tonne to £930/tonne (€366/tonne to €1,081/tonne). Paul Tompkins, vice chair of the UK’s National Union of Farmers dairy board, explains that the rise in costs of fertiliser is due to diesel prices doubling from £0.63 per litre to £1.29 (€0.73 to €1.50).

The European Milk Board is reporting that in Portugal prices have increased by 62% for diesel, 77% for maize, and 140% for nitrogen fertilisers. In France, energy costs have increased by 30%, and fertilizer costs have increased by over 80% in the last year.

The US

An interesting side effect of the situation in Europe is that big European dairy traders from countries such as the Netherlands are looking towards the US for cheaper cheese imports.

In the Midwest region of the US, milk production is increasing seasonally, which some cheesemakers say will increase availability in the coming weeks. Cheesemakers say demand is strong for retail cheddar and Italian-style cheese with Asian buyers purchasing loads to ship in Q2 of 2023.

Latin America

Prices decreased in September after record prices in August. However, demand is gaining strength and will probably limit further downward price pressure. Higher prices achieved in recent months enabled producers to absorb increases in operating costs.

Milk production in Latin America has increased 3.3% in H1 2022, compared to the same period last year. Favourable weather conditions have contributed to this increase, helping countries previously impacted by drought to see production move back into growth. Elevated milk prices have also supported this increase in volumes.

Higher production in Brazil has seen import demand drop back significantly. This has freed up product to be exported to destinations such as Algeria and China in recent months.

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Willoughby
Karen Willoughby Freelance journalist
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