As far as growth goes, India is the place to watch for the dairy industry, according to the latest Agricultural Outlook jointly released by the Organization for Economic Cooperation and Development with the United Nations Food and Agriculture Organization. The report, released July 11, expects world milk production to grow by 360 billion pounds (180 million tons) of milk per year by 2023 compared to 2011-2013.
India’s White Revolution
India, the world’s second-most populous country with 1.2 billion people, is about to experience a second White Revolution according to the report. Those familiar with Norman Borlaug’s work will recognize the Green Revolution that brought irrigation and double-cropping to the country originally reliant on monsoon rains for crops.
The White Revolution took place from 1970 to 1995 as the country attempted to “flood India with milk,” helping farmers cooperatives, and regions adopt technologies to improve production. From 1988-89 to 1995-96, milk production grew from 95 million pounds (42 million liters) to 152 million pounds (67 million liters). Today, the country leads the world in milk production of buffalo and goat milk, and is second in cow milk. Compared to the entire European Union, India currently trails the region in overall milk production. However, by 2023 it is expected to produce 8 billion pounds (40 million tons) more milk than the E.U. The U.S. will remain the third-most productive milk producer, followed by China, Pakistan, Russia, Brazil, New Zealand, and Turkey.
The elephant in the room continues to be China, a country that has milk prices 30% higher than the average world price as feed, labor and land costs continue to grow and margins declined.
China’s per capita consumption of dairy products is one-third of the world’s average, but is expected to increase by 35% over 10 years. Domestic production in China grew 3.5% per year over the previous 10 years, and is expected to slow slightly to 2.7% growth per year by 2023.
The U.S. is expected to grow at 0.9% of production per year, with a dairy herd that declines at -0.1% per year. Meanwhile, the E.U.’s abolition of its quota system has little effect as the report expects 0.5% growth in the region.
Exports continue trends
Helping use some of the additional production will be skim milk powder, which the organizations see as a product with 33% trade growth potential - the highest of any agricultural commodity - followed by poultry at 31%. Cheese trade should grow 28%, beef by 26%, whole milk powder by 25%, and butter expects to be the slowest growing commodity at 10% trade growth. Not included in the report is recent developments of fresh dairy trade, including milk, and yogurt.
The report expects growth to be met by the U.S., E.U., New Zealand and Australia. The four units together are expected to for 74% of cheese, 74% of whole milk powder, 81% of butter, and 85% of skim milk powder exports in 2023.
The E.U. is and will continue to lead the world in cheese exports, but the other major importers will have a faster growth rate in cheese exports.
Source: OECD-FAO Agricultural Outlook