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Dairy Market Analysis

The dairy industry is crucial in any given nation’s food supply as milk represents a nutrient-dense and adaptable product that can be utilized throughout the food supply chain. The dairy market comprises a range of products from traditional items such as fluid milk, butter, and cheeses to the ingredient market featuring powdered and processed products that are added to any number of food items.

Key facts about the global dairy market
  • US milk production in 2019 was 218.3 billion lbs, which represented a new record level of production.
  • Milk production efficiency continues to improve as dairy cows give more milk every year. Annual growth in production per cow (PPC) in the US has been positive since 2001 and has averaged 1.6% over the last 30 years.
  • In 2019, exports of US dairy products accounted for 14.5% of total production. Mexico was the largest importer of US dairy products.
  • When considering production of only cow’s milk, the US is the world’s largest producer followed by India and Brazil. When expanded to also include buffalo milk production, India becomes the world’s largest milk producer.
  • The major exporting regions include the US, Europe, and Oceania. Production and exports in Oceania, particularly New Zealand, have increased over the past three decades as trade relations with China have blossomed.

Key themes affecting the dairy market

The US dairy sector is coming out of a period of low margins fuelled by low dairy product prices. After historically high milk prices in 2014, production increased too quickly, leading to a precipitous fall in prices in 2015 that lasted through the first half of 2019. Depression in milk prices has certainly happened before, but for this round of low prices to happen so quickly after a period of record farm incomes left many operations with debt loads that were unsustainable.

As such, consolidation in the dairy industry remains a major theme; the number of dairy farms decreases at a much quicker rate than the number of dairy cows. This means that active dairy operations continue to grow in size and scale every year. Currently, as margins have improved significantly, the dairy herd has again begun a period of expansion.

Trade disputes have had major impacts on the US dairy market as exports become more and more vital to the industry at large. Tariffs placed by both Mexico and China stifled exports of some dairy products through much of 2019. However, as trade relations warm with major dairy importers, the potential for major US export growth remains positive. The US currently competes in exports with Europe and Oceania. New Zealand, with its proximity to China, has become a major player in the export market over the past few decades. However, as Chinese demand for dairy products continues to grow, increased market share for other regions becomes a distinct possibility, especially if prices from other exporters remain competitive relative to those in New Zealand.

Solutions

At IHS Markit we offer market-leading food commodities information solutions via our globally recognised IEG Vantage and IEG Vu services across 20,000+ datasets. We are specialists in offering comprehensive data and analysis across the global agricultural commodities and processed food markets, with current, short-term and long-term solutions to support all your operational needs.

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IEG Vu’s daily service is the market leader in updates and news on the agricultural commodity and processed food markets, with modular channel access available across the breadth of traded food, including the international dairy market. Coverage spans from pricing news and key trends impacting production to incoming legislation and geopolitical impacts to the market. An IEG Vu subscription also includes access to a range of historic data tools covering pricing, trade volumes and production at a granular level.

Short- and mid-term forecasts
Weekly and monthly production, trade and price forecasts

IEG Vantage is the only service in the market that provides comprehensive analysis of near-term market developments for the 12 months ahead, from market trends to supply-demand, production and price forecasts. Dairy coverage includes a wide range of milk and cheese markets and data points. Subscriptions also include daily market commentary to provide context for daily trading and procurement workflow needs.

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Our Agriculture Pricing and Purchasing Service enables supply chain cost savings with 10-year cost and price forecasts across all agricultural products and inputs, from edible food commodities to paper and plastic packaging and wages. Over 3,000 global data sets are available via a cost analyser platform that supports clients in understanding escalation rates to improve their business buying performance. Data can also be input into a cost modelling framework that breaks down input costs to manufactured food products.

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