Dairy Production in Selected Countries
Cow milk production in selected countries for 1998 is estimated at 384.9 million tons, up 1 percent from 1997. Strong production growth in Brazil, India, China, Argentina, and Australia account for most of the global growth. The European Union (EU) is expected to be the only major producer that shows a significant decline.
For 1999, cow milk production is forecast to increase another 2.6 million tons at the global level. On-going economic problems may cause Russian milk production to again decline significantly after leveling off in 1998.
Milk cow numbers continued trending downward in most countries during 1998, reaching 129.9 million head, but rising output per-cow allowed milk production to increase. A further small decline in cow numbers is forecast for 1999; however, higher per cow yields due to continuing genetic improvement and better management is expected to facilitate another increase in milk production.
For the major dairy products, only non-fat dry milk (NDM) production at 3.1 million tons is down in 1998. Output of cheese, butter, and whole milk powder (WMP), estimated at 12.2, 5.3, and 2.7 million tons respectively, each showed some growth in 1998. For 1999, butter and NDM production are forecast to gain another 3 to 4 percent, while cheese and WMP will grow but at a slower rate.
North America: Milk production in the United States for 1998 is estimated at 71.4 million tons, up less that 1 percent from 1997. Growth in milk-per-cow has been slow despite higher milk prices and plentiful supplies of concentrate feeds. For 1999, continued favorable feed-milk price relationships should induce a 2-percent increase in milk production despite a further decline in cow numbers.
Slow growth in U.S. milk production coupled with continued steady growth in cheese output had a sharp impact on U.S. butter production, particularly in the first three-quarters of 1998. USDA statistics show January-September butter production was 10.5 percent below comparable months of 1997. Output of butter and NDM are expected to rebound in 1999 while cheese production continues its steady upward march.
In Canada, rapid growth in demand for manufactured dairy products in late 1997 and early 1998 gave Canadian officials a basis for raising their production quotas and that will result in more production in 1999. Canadian milk producers are subject to production quotas based on estimated demand for manufacturing milk (Market Sharing Quota, or MSQ ) For the 1997/98 dairy year (August/July) the MSQ was reduced 2 percent to 42.9 million hectoliters for milk; however, preliminary estimates say that figure was exceeded by 12 to 13 percent as optimistic production plans were carried out. For 1998/99, the MSQ was boosted to 43.8 million hectoliters but, as recent years demonstrate, actual production is likely to exceed the MSQ.
On February 1, 1998, the Canadian Dairy Commission initiated new support (target) prices for butter and NDM. The new support prices of $C5.39 per kilogram of butter and $C4.43 per kilogram of NDM. These new prices allowed the target prices for industrial milk to be boosted to $C55.9l /hl ($US 16.50 cwt).
In Mexico, 1998 milk production is estimated at 8.0 million tons with growth to 8.1 million in 1999. Despite continued tight margins, large efficient producers in Mexico are increasing both herds and per-cow yields, however, some of these gains are being offset by reductions in the number of small and medium-sized producers.
At one time, many Mexican officials were optimistic that development of a dairy industry in the tropics would provide substantial relief from the need to maintain a high level of imports; however, fluid milk production in the tropics continues to fluctuate according to the weather. Milk production in tropical areas remains relatively undeveloped and the current low level of development is further hindered by a lack of marketing facilities and other basic infrastructure.
South America: Argentina's 1998 milk production is estimated at 9.4 million tons, up 4 percent from 1997. Output is projected to increase again in 1999, to a record 9.8 million tons. A stable economy, a relatively unhindered dairy sector, and increased domestic consumption in the past 5 years have made the sector one of the most dynamic at both the farm and processor levels. Profitability margins for producing milk are generally quite tight with the result that some smaller, less-efficient producers have abandoned milk production.
One factor that may slow longer term production prospects in Argentina is the proportion of production that goes to the export market since the domestic market, with relatively more higher value products, gives better returns than the export market, i.e. increased exports may mean lower producer prices. In 1997 exports accounted for approximately 12 percent of milk utilization, but that proportion is expected to grow to 20 percent by the year 2000.
Milk production in Brazil continued its rapid expansion, rising to 21.6 million tons in 1998 with further growth expected in 1999. The increase reflects gains in per-cow productivity due to genetic improvements, good weather in most regions, generally favorable returns to producers and increased dairy production from non-traditional milk-producing areas. Despite the rapid increases in production, Brazil remains a major importer of dairy products because a large proportion of the production increases is being used by the fluid market. Slower growth in the domestic economy is expected weaken demand growth for both domestic and imported dairy products in late 1998 and early 1999.
European Union (EU): Overall milk production is down slightly in 1998 and another small decline is projected for 1999. Under the EU quota system managed on an April/March year, "in-quota" milk production is very profitable with the result that most producers try very hard not to under produce. As a result, in years when conditions are favorable for milk production, such as 1997/98, national quotas are often exceeded by significant quantities. With milk production expected to decline slightly, EU dairy product output is like to show only moderate fluctuations in 1998 and 1999 as processors concentrate on products with the best market prospects.
Eastern Europe: Poland's 1998 milk production is estimated at 12.1 million tons, only 1 percent above 1997. A somewhat stronger rate of growth is expected in 1999. The EUs ban on dairy imports from Poland and the Russian financial crisis are the major factors behind 1998's slow growth while some relaxation of the terms of the ban may help 1999.
Beginning in late 1997, the EU banned imports of Polish dairy products. EU officials say it was due to inadequate sanitary conditions in manufacturing plants while Polish officials say it was mostly politics. Exports worth approximately $200 million worth of trade were involved. In September 1998, 5 plants were re-approved to ship to the EU. Polish officials expect the ban to be entirely lifted in the near future.
Relative to the Russian crisis, in calendar 1997 and early 1998 approximately 60 percent of Polands cheese exports were sent to Russia. The Polish dairy industry is finding it difficult to replace that important market and when it may return is very uncertain.
Former Soviet Union: The impact of the financial crisis is being strongly felt by the Russian dairy sector. Milk production which appeared to stabilize in early 1998 is likely to decline again as producers face new pressure on their profitability margins. On the other hand, some Russian processing companies say the higher prices for imported dairy products (in ruble terms) has significantly boosted their ability to compete.
Difficult economic conditions persist in Ukraine's dairy industry but milk production is expected to increase slightly in 1998 due to increased production on private farms and plots. Output on the larger state farms continues to decline.
For 1999, the smaller grain crop harvested in 1998 will hurt feed availability during the first half of the year which is likely to cause a contraction in annual production. Ukrainian milk producers claim that current farm milk prices cover less than 60 percent of the cost of production.
Asia: India's 1998 cow milk production is estimated at a record 35.5 million tons, up 3 percent from 1997. A slower rate of increase is projected for 1999. In addition to cow milk, India also has a strong buffalo milk sector which is both larger and growing faster than cow milk production.
Along with milk, production of value-added dairy products continues to grow rapidly with some estimating annual growth at 10 percent. As a result of the rapid production growth, imports of dairy products have shown a tendency to decline.
Chinese milk production for 1998 and 1999 is forecast at 7.2 and 7.6 million tons, up 8 and 6 percent, respectively. Much of the rapid growth is due to improved genetics as native cattle are crossbred with Holsteins. Both low prices and inefficient management practices are expected to continue to be a drag on future production increases.
Japanese 1998 milk production is estimated at 8.6 million tons, one percent below 1997. Another small decline is likely in 1999. Tight margins have reduced the incentive for anyone to expand while smaller, less efficient operations continue to exit the industry.
Oceania: New Zealand milk output in 1998/99 (June/May) is expected to total 11.5 million tons, a decrease of 2 percent from last years record output. The decline is due to persistent dry conditions that have affected major dairy areas in the North Island. A second factor behind the forecast of slower growth is the probability that farmgate milk prices will be down again. The New Zealand Dairy Board (NZDB) payout for the 1997/98 season was $NZ3.00 per kilogram of milk solids. Although the pre-season outlook was for a small price increase, the Russian financial crisis has forced the NZDB to rethink its forecasts. As a result of the uncertain outlook, farmers are economizing on their expenditures on normally productive inputs like feed and fertilizer.
With only a small increase in New Zealands milk production expected in 1998/99, output of most products will be down. Output of cheese in 1998/99 is expected to decline about 8 percent with butter and NDM taking up the extra milk. Output of WMP may also decline reflecting slow demand in Asian markets.
Australian 1998/99 (July/June) milk production is expected to total 9.9 million tons, 3 percent above last years record. Much of the increase is due to increased herd numbers as producers add to their milking herds.
Unlike the New Zealand situation, early season weather conditions in Australian dairy regions have been generally favorable. Most of the increased production is expected to occur in the Eastern States, particularly Victoria and Tasmania where a larger share of the milk is used for manufacturing purposes.
Farm prices for manufacturing milk were generally stable in 1997/98 and may increase in 1998/99 in large measure due to the declining value of the Australian dollar. Even though prices for manufacturing milk are said to be on the low side, milk production still represents better returns than competing enterprises such as sheep or beef.