Demand for dairy products is being bolstered by improvements in welfare conditions in emerging markets. Increasing populations combined with increases in per capita consumption are responsible for the stronger demand.
Milk production is also growing but not as quickly as demand. Milk supply growth is particularly fast in the emerging countries where the number of dairy farms are increasing. Meanwhile the dairy industries of developed nations are looking to maximise their margins, resulting in an increase in farm sizes and yield per cow.
The IFCN has forecast a long term continuous increase in milk prices. But in the short term it is assumed increased price volatility will occur as a consequence of a reduction in global stocks of dairy products. Traditionally, stocks of dairy products have acted as a buffer for periods when temporary shortages to supply occur.
2013 is expected to be an exceptionally good year in terms of prices. This year there will be limited growth in milk supplies due to poor weather conditions and a lack of on-farm profits in 2012. In 2014 the IFCN envisage a strengthening in milk supply. This will result in an easing of prices but overall prices will still be at high levels. Significant fluctations of prices are forecast to occur within 2014.
Across the next decade the IFCN forecast that an additional 230 million tonnes of additional dairy production will occur. This will be driven by supplies trying to keep abreast with increasing demand. This demand will be driven by population growth and improved welfare conditions increasing per capita consumption.
The IFCN (International Farm Comparison Network), founded in 1997, is a global network of economic researchers from over 90 countries covering 98% of total global milk and buffalo milk production.