In W32 in the dairy landscape, global dairy market prices continued with a downward trend. This was evident in the recent Global Dairy Trade (GDT) auction, where most products registered declines, except for dehydrated milk fat. The aggregate price index dropped by 1.0% to 959 points, a two-and-a-half-year low. Cheddar cheese suffered the most significant decrease, plummeting by 10.1% to USD 3,852.51/metric tons (mt) for Jan-24 contracts compared to W30. Skimmed milk powder also hit a multi-year low at USD 2,438.28/mt, the lowest since May-20. Whole milk powder reached an average of USD 3,018.62/mt across all grades and maturities, a decrease of 17.5% year-on-year (YoY). Weak demand, especially from China, coupled with surplus milk production in Europe, the United States (US), and New Zealand, played a role in these market dynamics.
HighGround Dairy expects Chinese demand for New Zealand's whole milk powder to remain sluggish for the remainder of 2023, potentially not recovering until 2024. China, the world's largest dairy market, experienced decreased demand due to higher domestic milk production and a slowing economy. This led to a 30% drop in Chinese milk powder imports in the first half of 2023. This situation affected prices on the GDT auction platform, which are down 4.5% in 2023 and 17% YoY. HighGround expects further downward pressure on prices. The bearish outlook is attributed to economic concerns in China, its growing domestic milk market's efficiency, and domestic brands' popularity. Chinese buyers have been notably absent from the GDT auctions, possibly due to GDT values being comparable to domestic spot prices in China. Despite the current downturn, long-term Chinese dairy consumption prospects are expected to rise due to the country's growth potential and low per capita dairy consumption.
The Vologda Oblast region in Russia witnessed a significant 44.5% surge in raw milk production over the last decade. The region’s gross milk yield amounted to 316.7 thousand mt in the first half of 2023, an increase of 5.8% YoY. This rise primarily came from increased output in agricultural organizations, constituting 96.1% of the regional output at 304.3 thousand mt, a 6.7% YoY growth. Both state support measures and investment projects played significant roles in this production surge. Domestic dairies also produced 5.6 thousand mt of freeze-dried cream, a 28.2% YoY increase. Overall, the development of the dairy industry, state support, and improved livestock contribute to higher raw milk production and processed goods output. It’s worth noting that the Vologda Oblast region is exporting excess raw milk to other Russian regions.
Lastly, the Zimbabwean government is targeting a boost in annual national milk production volume to 130 thousand mt by 2024. Drought and high feed costs led to declining raw milk production from 260 thousand mt to 40 thousand mt per year between 1990 and 2008. A recent program involving 1.5 thousand domestic farmers is striving to drastically increase interior raw milk production over two decades. The program is funded by the European Union (EU), Zimbabwe Agricultural Growth Program, and Zimbabwe Dairy Farmers Association. The program aims to enhance milk quality, reduce production costs, and ensure environmental compliance. Zimbabwean milk production reached 90 thousand mt while dairy imports totaled 7.4 thousand mt in 2022, a 15% YoY increase in production and a 17% YoY decline in imports. Experts expect Zimbabwe's milk volume to reach 105 thousand mt by the end of 2023.