The global dairy sector hit by changing climate and trade agreements 

The global dairy export trade grew in volumes to over 2.5 million tonnes by almost 21 per cent in the six years to 2018. The collection of Big & global dairy regions found growth of just 0.1 per cent year on year in 2018, which the reports found the farm gates could not recover the costs of inputs and have flattened gains in most regions. 

The US milk production grew just 1 per cent, and EU production declined on y-o-y. Similar patterns were seen in Brazil, where higher costs and Australia hit the production.  

Australia faces a supply slump where its share in global trade declined 16 per cent from the 1990s to now 6 per cent, and it indicates shrinking competitiveness, where the export trade of the largest local farms has fallen by 6 per cent.  

About 25 per cent of the dairy products from the US are exported to neighbouring south – Mexico and Canada, as the trade is dependent on the US – Mexico – Canada agreement, and the farmers are waiting for the resolution of the North American trade deal – that will replace NAFTA to restore dairy business. 

New Zealand had major gains in the sector due to higher-than-normal temperatures in February, which supported beachside farms but can hit growth in summer. 

Trade disagreements and weather changes have hit the markets where international dairy prices continue to grow. New Zealand dairy prices grew 19 per cent from December last year to March 2019, and a rise in the milk powder rates by over 25 per cent was reported in the three months.

 In the second week of May, the global dairy products’ rate increased for the 11th time due to waning production in the country, where the average selling price was $3,490 per tonne. The sector generates over 7 per cent of the country’s GDP.

UK Hoarding Dairy for Brexit  

There has been an increase in demand in the last year, but there remain uncertainties in the sector where the oversupply due to political issues can weaken demand. 

UK cheese exports increased in February 2019 by 30 per cent from the same month last year, and its butter exports grew 52 per cent in the same duration. 

Such exports were made to the EU destinations and were mainly driven by the stockpiling for a no-deal exit. In case of no-deal Brexit, the same products will face tariffs, creating gains which led to stockpiling cheese over 40,000 t in the country – to supply customers for six months in case of trade issues. 

At the same time, exports to non-EU nations declined. The report on declining production finds that domestic markets are facing challenges of processing where the trade is not transparent and open for all, and farmers cannot get the right support for pricing based on interprocessor purchases. 

Due to changes in trade agreements, the demand for US retail sales and dairy remained volatile, and the economic challenges in South America resulted in poor consumption. Even the EU consumption growth forecast for the year 2019 was modest.