Weekly Product Updates

W34: Dairy Update

Cow Milk
Argentina
Market & Price Trends
Dairy
China
Published Sep 1, 2023
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In W34 in the dairy landscape, the Argentine Dairy Chain Observatory (OCLA) revealed that Argentine milk deliveries reached 988 million liters in Jul-23, a 9% month-on-month (MoM) growth but a modest 0.2% year-on-year (YoY) decline. Notably, this production stability level is remarkable, given the widespread and prolonged dry season that affected pasture availability in 2023. While negative interannual rates are anticipated for the remaining winter months, the sector's performance in Q2-23 will ultimately determine the final annual production volume. Experts expect a 2% to 3% YoY maximum milk production decline in 2023.

Amid the ongoing intense heatwave impacting both urban and rural areas in Italy, animals including cows are grappling with heat stress. This situation has resulted in a significant reduction of up to 15% in milk production. This is despite efforts, such as cooling stables with fans and showers, to counteract the scorching summer of 2023. Temperatures soaring to 40 degrees Celsius (°C), poses a severe challenge for both humans and animals. Cows are particularly affected, as their optimal climate lies between 22°C and 24°C. Beyond this range, cows eat less, drink more water, and yield low milk quantities. The heat has driven cows to consume up to 140 liters of water daily, compared to 70 liters during cooler periods. Alongside the milk output drop, the animals' endurance against the heat also strains energy and water resources, compounding challenges.

The Chinese Ministry of Agriculture and Rural Affairs reports that the average price of raw milk stood at USD 0.52 per kilogram (kg) in Jul-23 in China. This indicates a 1.64% MoM decrease, an 8.8% YoY decline, and a continuous nine-month downward price trend. According to the National Bureau of Statistics, China’s dairy product output reached 17.57 million metric tons (mmt) during the Jan-23 to Jul-23 period, a 4.5% YoY increase. Dairy product production reached 2.45 mmt in Jul-23, a 3.1% YoY rise. This suggests that increased supply could be a driving factor in decreasing prices.

India's organized dairy industry is projected to achieve a 14% to 16% YoY revenue surge in 2023. This increase can be attributed to a strong value-added product demand and consistent milk consumption. The Crisil agency predicts that improved raw milk supply will curtail price hikes, leading to a recovery in profitability by 0.2% to 0.5%. Raw milk supply disruptions during the 2022 season led to multiple retail milk price increases, resulting in a 19% YoY revenue boost but negatively impacting profitability. Milk prices surged by nearly 24% over the past three years, including a 10.5% increase in the past year and 0.3% in Jul-23. This upward price trend is attributed to reduced calf births from artificial insemination during COVID-19 and livestock care challenges, leading to production declines and subsequent dairy product shortages.

Lastly, supply-side challenges prompted a 14% YoY increase in milk procurement prices in 2023 in India. Milk price increases are expected to be more modest in 2023, driven by enhanced raw milk supply and previous price adjustments, potentially improving profitability. 

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