W7 Dairy Update: Growth in Turkish Dairy Production Amid Declining Exports, European Milk Prices Face Challenges

Published 2024년 2월 23일

In W7 in the dairy landscape, according to the data released by TURKSTAT in W7, Turkish dairy production demonstrated growth across various categories in 2023, with increases in cow milk, cheese, yogurt, ayran, and butter production, reflecting sustained sector expansion. However, dairy exports from Türkiye experienced a 36.06% YoY decline, contrasting with a significant surge in imports. While domestic demand remains stable, concerns arise about the sector's international competitiveness amidst increased global competition and shifting export dynamics. Meanwhile, European milk prices observed a decline in Jan-24, attributed to reduced sales, logistical challenges, and concerns about long-term sustainability given sluggish production growth and potential herd reductions in key markets like the US.

Growth in Turkish Dairy Production Offset by Export Decline

The Turkish Statistical Institute (TURKSTAT) released data on Türkiye's dairy sector in 2023, revealing contrasting trends in production, trade, and product categories. Cow milk production reached 10.2 million metric tons (mmt) in 2023, reflecting a 4.8% year-on-year (YoY) increase. This suggests sustained growth in the sector, potentially driven by factors such as favorable market conditions or investments in production capacity. Drinking milk production reached 1.5 mmt from Jan-23 to Dec-23, exhibiting a modest 1.5% YoY increase. This indicates continued domestic demand for this product category. Cheese production from cow's milk saw a significant 9.7% YoY increase to 771 thousand mt, while yogurt production remained relatively stable at 1.2 mmt. Ayran production stood at 829.6 thousand metric tons (mt), and butter production with 87.1 thousand mt also exhibited YoY growth.

Dairy product exports from Türkiye declined by 36.06% YoY to USD 390.6 million in 2023. This significant decrease necessitates further investigation into potential contributing factors such as increased global competition, changes in export dynamics, and currency fluctuations. Conversely, dairy product imports surged by 56.2% YoY to USD 130.7 million in 2023. While Turkish dairy production in 2023 demonstrated positive growth across various categories, the decline in exports raises concerns about the sector's international competitiveness.

European Milk Prices Decline Amid Export Challenges and Production Concerns

European milk prices witnessed a 1.44% month-on-month (MoM) decrease in Jan-24, according to the Ukrainian Association of Milk Producers (AVM). This decline is primarily attributed to reduced sales and inventory accumulation with the weakening demand and a buildup of finished dairy products in storage facilities exerting downward pressure on prices. Logistical hurdles, including issues with the Suez Canal, lead to increased shipping costs and extended delivery times, further impacting export prospects and pressuring prices.

While the current price decline appears to be a short-term phenomenon, there are concerns regarding long-term sustainability. Global milk production growth in 2023 was only 0.25% YoY, significantly below the estimated 2% required to meet future global demand. The decline in production, coupled with the possibility of further herd reductions in the United States (US), as evidenced by the 2% YoY decrease in cattle numbers, could lead to a price rebound in the short-term, potentially exceeding the USD 0.55 to 0.60 per unit range.