7 November 2012

2 minute read

“Last year was a golden dairy year,” said Adriaan Krijger, editor of the World Dairy Situation 2012 report. The report, based on questionnaires filled in by the national committees of the International Dairy Federation (IDF), showed that global milk production jumped by 2.5 per cent to 749 million tonnes in 2011 on the back of higher milk prices.

Speaking at the World Dairy Summit currently on in Cape Town, Mr Krijger said that this increase in milk production was an improvement on 2010's year on year increase of 2 per cent.

“The weather in 2011 was favourable and demand for dairy products was strong, resulting in higher prices,” he said. “The extra milk production was easily absorbed by the global market.”

Mr Krijger presented data which showed that world output for every dairy product was higher last year, but growth was especially pronounced in the butter and skim milk powder categories. The demand for butter last year is largely attributed to exceptional growth in the US and New Zealand.

“Part of the reason why the demand for skim milk powder improved so much was that many manufacturers felt that whole milk powder was too expensive and instead switched to using skim milk powder in conjunction with milk fat,” he said.

As far as dairy consumption patterns went, there was a strong improvement over the past six years in South America (26 per cent), Africa (22 per cent) and Asia (13 per cent), while the demand in Europe declined.

“Increasing GDP and strong population growth in these regions has resulted in a surge in demand for dairy in the developing world,” Mr Krijger explained.

The four major dairy exporting countries are the European Union, the US, Australia and New Zealand. “The world dairy trade amounted to 58.2 tonnes in 2011, an increase of 10 per cent,” Krijger said. “This is well above the average growth rate of 4 per cent in the past decade. All exporters benefited from this boost in demand, while Europe also had in its favour a more competitive euro/dollar exchange rate.”

A further feature of 2011 was heightened merger and acquisition activity, particularly in Europe, but also in Brazil. Lactalis bought a controlling share in Parmalat, while General Mills took over Yoplait. In Brazil, LeitBom and Bom Gosto merged to form LBR with an annual turnover of $1.8 billion.

Despite last year's impressive performance in global dairy sales, this year does not hold as much promise in terms of growth. “Output is expected to slow down further in the second half of 2012 as a consequence of lower prices, higher feed costs and an adverse weather situation in most parts of the world,” Mr Krijger said.