Dairy – What Does The Future Hold?

Posted on: April 04, 2017

Predicting the future of the dairy industry

With all the complexities affecting the dairy industry, accurately predicting the future of the industry is a difficult task. However, one organization – the International Farm Comparison Network (IFCN) – is helping give the industry a glimpse into the future by collating extensive data from a variety of sources obtained since 1996. Welcome to a glimpse of the dairy world in 2025 done by IFCN in 2016:

Long-term milk price level

A long term world milk price of 41 USD/100kg milk (ECM 4.0% fat, 3.3% protein) is estimated, 46% higher than in 2015. Using an exchange rate assumption of 1,17 US-$/Euro this is 36,7 Euro. At this price level, it is predicted that world milk demand and supply will balance out.

Dairy economics in 2025 - fewer, bigger farms and higher milk prices

The dairy growth story is expected to continue:

In the last 10 years, milk demand and supply increased by 26% or annually by 2.4%. Between now and 2025, a growth of 25% is predicted, which will represent an average annual growth of 2.3%. Even though this percentage of growth is lower than in the past, the volume growth will be stronger compared to the last 10 years. According to this, 208 million tonnes more milk will be consumed and produced.

Population growth and higher per capita consumption drives future demand:

Between now and 2025, global population will increase by 12% up to 8.2 billion people, so almost 1 billion more consumers will demand milk products. Global per capita consumption will increase by 13 kg ME per year (127 kg per person). The highest increase in per capita consumption will take place in South Asia (+30%) up to 174 kg ME per person.

Trade of dairy products will gain further relevance:

Within the time period 2005-2015, world trade increased by 29%. Looking at the next 10 years, the net trade is expected to increase by 51% up to 79 million tonnes of milk (ECM) in 2025. This reflects the increasing importance of trade in the dairy world and the development of shifting dairy production to more competitive locations.

The dairy world will have new net importers and new net exporters:

In 2025, some countries will have changed their net trade status. While India and Iran are predicted to be net importers, Romania will play a role as a net exporter. While China, Africa and Pakistan will increase their net imports, the EU, New Zealand, Belarus and Argentina will increase their net exports.

Level of global milk supply will keep on growing and cover global demand:

Milk production is expected to increase by 25%, up to 1038 million tonnes of milk (ECM) in 2025. Half of the production growth is expected to take place in South Asia. Regional supply will increase by 45% to 327 million tonnes of milk (ECM). While Eastern Europe will increase by 16% and provide 17 million tonnes of milk (ECM) more, Western Europe will increase production by 9%, and additionally increase by 13 million tonnes of milk (ECM).

There will be 405 million dairy animals in the world in 2025:

On a global level, the growth in the number of dairy animals will slow down from 13% (2005-2015) to 9% (2015-2025). However, South Asia will increase its number of dairy cows and buffalos up to 177 million and Africa will have 80 million milk animals. Together they will represent 63% of the total dairy animal population in 2025. The EU will decrease the number of dairy animals by 3%. An additional driver for milk production growth is the milk yield per dairy animal. This is expected to increase by 14%, reaching an average of 2.5 tonnes per milk animal per year.

Fewer farms, but larger farm sizes in 2025.

In the next 10 years, the number of dairy farms globally will decrease to 103 million, so fewer farms will produce a greater amount of milk. Contrary to this trend, more dairy farms will emerge (+11%) in Africa. South Asia will lose 17% of its farms but increase its average milk yield by 31% per milk animal. Average world milk production per farm has been increasing by 16% in the last 10 years and it is expected to increase further by 47%.

This blog is based on Dr Torsten Hemme’s presentation on ‘Dairy Economics – The Dairy World Now and in 2025’ at the Bayer Dairy Cattle Summit 2017.

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Published:

April 04, 2017