Contents - Previous - Next

Milk and milk products

Production slightly lower

World output of milk from cows and other livestock was tentatively estimated at 518 million tonnes in 1993, 1 percent lower than the previous year, reflecting lower output in the developed countries. In the developing countries, production rose 3 percent to 173 million tonnes.

Contraction in the former USSR continued

In the former USSR, milk production dropped by 11 percent during 1992 and was estimated to have fallen by a further 9 percent in 1993. There was a continuation of herd reduction and supplies of winter fodder and feed were also lower. In eastern Europe production was also estimated to have declined in 1993, by an average of 8 percent. In a number of these countries, higher farm-gate prices were outpaced by rising input costs; and, as a consequence of the reduced profitability of milk production, cow numbers declined.

For most other developed countries, milk output was anticipated to be maintained during 1993. Productivity gains served to offset the continuing decline in total dairy cow numbers. In the EC, January to June milk deliveries were in line with those of the previous year and overall production was expected to remain at the same level as in 1992. Output was also stable in other Western European countries. In Japan, with a government programme to cull dairy cows, production was contained at a level slightly above that of the previous year.

In North America, production of milk was slightly lower in both Canada and the United States. Canadian output declined as production quotas were reduced in line with lower overall consumption of dairy products. In the United States, production was expected to be just below the previous year's record output of 68.8 million tonnes, when exceptionally favourable weather conditions resulted in a higher than average yield. In Oceania, production grew in both Australia and New Zealand due to favourable weather conditions and investments to increase productivity.

Milk output in the developing countries expanded

Amongst the developing countries, fastest growth was forecast for the Far East, where production was expected to rise by 4 percent. In India, the largest producer among the developing countries, a 4 percent expansion in output was anticipated as a result of improved yields, stemming from genetic improvements and favourable pasture conditions. The increased involvement of private firms in dairy processing, after the easing of government regulations affecting access to the sector was reported to have led to higher producer prices in some areas. In China, milk output grew by 6 percent in 1992, and a similar increase was forecast for 1993; however, there was a possibility that higher feed grain prices might restrain growth.

In Latin America and the Caribbean, a further expansion of about 2 percent was forecast. Higher producer prices, following the abolition or reduction of government controls, combined with favourable weather conditions, were forecast to stimulate production in several countries including Argentina, Chile and Ecuador. In Colombia, production was expected to recover from the reduced, drought-induced, level in 1992. In Brazil production was expected to be lower in 1993, due in part to a fall in consumption following the decontrol of, and subsequent rise in, retail prices in 1992. In Venezuela, the high cost of imported feed was expected to continue to contribute to lower production.

In African developing countries, aggregate production in 1993 was forecast to remain at a similar level to the previous year. Several countries continued to show steady growth in output, but decline was anticipated in countries of southern Africa where herds were reduced and feed prices increased by the previous year's drought. In some countries, higher feed costs, combined with reduced controls on milk prices, resulted in much increased consumer prices. In the case of Zimbabwe, these caused a subsequent contraction in consumption and excess milk supplies had to be converted into skimmed milk powder for storage.

Consumption linked to income levels

In a number of developed countries the trend towards lower consumption of milk fat, especially butter, continued with consumers switching to low fat milk and dairy products. However, in the developing countries, per caput consumption of milk and dairy products while lower, averaging 36 kg per caput compared to 200 kg per caput in the developed Countries, is rising due to increased incomes. in several countries, higher demand stimulated production and, in some, resulted in higher levels of imports.

No increase in trade, some prices drifted downwards

World exports in 1992 were 55 million tonnes in milk equivalent, 6 percent higher than the previous year. For 1993, no increase in the overall level of exports was foreseen. The demand for cheese was expected to result in higher exports at sustained prices. Smaller increases in the export volumes of butter and ghee, and whole milk powder, were anticipated.

Skim milk powder prices

As regards butter, the members of GATT's International Dairy Arrangement were granted a derogation in June 1993 to export to countries of the former USSR up to 50 000 tonnes of butter per member at below $1 350 per tonne, the minimum price under the Arrangement. Lower exports were expected for condensed milk and skimmed milk powder.

For dairy products as a whole, exports accounted for 11 percent of global output of milk and milk products. Even if the substantial intra-EC trade is excluded, the EC continued to be by far the largest exporter, with Oceania in second place and North America in third, On a product by product basis, however, Oceania exported more butter and ghee than the EC and was forecast to raise shipments in 1993 of all its major export commodities with the exception of skimmed milk powder. In the United States, the increase in funds allocated to the Dairy Export Incentive Programme (DEIP) in recent years has led to growing North American exports of butter and skimmed milk powder. In the first six months of 1993, exports under this programme were 23 percent higher than in the same period in 1992.

Countries of the former USSR, taken together, continued to be the largest importer of butter, although the bulk was food aid or purchases on concessionary terms. This market represented a particularly important outlet for surplus stocks as elsewhere demand for butter was stagnant. Japan consolidated its position as the leading importer of skimmed milk powder and cheese, while its butter imports remained depressed due to above average domestic production. Oil exporting developing countries, such as Mexico, Venezuela, Algeria, the Islamic Republic of Iran, Malaysia and Indonesia were also active buyers in 1993. In Brazil, reduced funding for government-operated feeding programmes was expected to lead to diminished imports, while in Colombia the recovery of production during 1993 led to a temporary ban on imports of liquid and powdered milk in the middle of the year.

In the EC, public stocks remained small reflecting a sustained reduction in skimmed milk powder production in 1993. Similarly, in the United States, with increased exports under the DEIP, there were only limited purchases for public stocks. In the case of butter, public stocks in both the EC and the United States were lower due to reduced output and sustained exports. Additionally, within the EC over 20 percent of butter production was used in a programme of subsidized sales to the baking and ice-cream industries, as in previous years.

Apart from a number of large-scale imports of dairy products made by several countries, including Algeria and Mexico, and some substantial shipments of butter to countries of the former USSR, the international dairy market in 1993 was characterised by sluggish demand for all major products, with the exception of cheese. Prices for milk powders drifted lower during the year, with prices of whole milk powder being more affected than those of skimmed milk powder. New Zealand, in particular, expanded production of whole milk powder in response to lower demand for butter on world markets. International butter prices remained at or near the GATT minimum level.

The value of global exports of milk and milk products was $24 400 million in 1992, of which developing countries accounted for $600 million. In 1993, lower prices for most products during the year and the absence of any significant increase in the volume of exports were expected to result in a decline in the global export value of milk and milk products.

World milk production to decrease further in 1994

Milk production was expected to decline further during 1994 with reduced overall output amongst the developed countries. Production in the EC would depend upon whether or not a proposed reduction in milk quotas of up to 2 percent in the 1994/95 marketing year would be implemented, In eastern Europe and the former USSR the overall contraction experienced since 1990 would probably continue. Production in the non-EC western European countries, Canada and Japan was expected to be stable, while in the United States and Oceania it was forecast to increase.

In the developing countries, milk production was anticipated to show further growth in the Far East, stimulated by rising demand. In addition, price liberalisation could also benefit producers in several Latin American countries. Further, production in southern Africa might begin to recover from the effects of herd reduction during the 1992 drought.

Little growth in international trade was foreseen for 1994, mainly as a result of efforts on the part of the EC to curb production of milk and to reduce the amount of export subsidies, Demand for most products was expected to be maintained; however, the disposal of butter on the international market was expected to continue to present problems and, as a consequence, its price would remain depressed. Prices for the all other major dairy products were forecast to remain at or near their 1993 levels. Finally, a combination of production restraints and consumption and export incentives was expected to preclude any significant rebuilding of public stocks of skimmed milk powder and butter in the EC and the United States.

Production

Exports

¹ Includes trade within EC.
² The difference between world imports and exports of both whole and skim milk powder is due to difficulties of classification in the case of countries whose statistics do not give sufficient breakdowns.
³ Excludes trade within EC.

Continue

Contents - Previous - Next