W3 Dairy Update: Emerging Markets Hold Back Dairy Demand, Russia's Milk Production Surge 5.1% YoY

Global Dairy Prices Decreasing, Casting Shadow on 2024 Recovery

Global dairy product prices continued their descent in Q3-23, with the United States (US) and Oceania cheese prices exhibiting instability and weakness in Q4-24. The Oceania region maintained low dairy product prices (excluding butter) compared to the five-year average, which can be attributed to increased inventory and reduced imports in major importing countries. Global crude oil production dipped by 0.2% year-on-year (YoY) in Q3-2023.

Projections indicate a continued decline in the seven major dairy-exporting countries until Q1-24, followed by a slight 0.3% YoY recovery in global crude oil production in 2024. Consumer choices may impact dairy product demand, with uncertainty persisting in 2024 due to reduced income, especially in emerging markets.

Despite signs of recovery in the food service industry, overall consumption growth in China is sluggish, likely limiting dairy imports in 2024. Climate factors and geopolitical conflicts are anticipated to influence the dairy market. In the European Union (EU), weather conditions and the bluetongue disease led to a 0.5% and 0.4% YoY decline in crude oil production in Q1 and Q2-23, impacting overall production in H1-24. Despite increased income, demand for dairy products in the food service industry is expected to see minimal growth, with sluggish publicity due to rising production costs. In the US, declining crude oil prices are affecting farmers' profits, leading to a prolonged reduction in crude oil production until mid-2024. Increased demand is anticipated as consumer prices stabilize and economic burdens ease.

After a record surge in 2022, dairy product exports have stagnated, particularly in Mexico, where a purchasing power decline impacted US dairy product imports since Aug-22. New Zealand faces challenges with reduced milking cows and adverse weather affecting crude oil production. Dry conditions and high feed prices are expected to cause over 2% YoY reduction in raw milk production in 2023/24. In Australia, climate anomalies and rising interest rates may limit the increase in crude oil production as production costs escalate.

Russia's Milk Production Surge 5.1% YoY

In Russia, in the first eleven months of 2023, the per-head milk yield from cows in agricultural organizations, excluding micro-enterprises, exhibited a robust 5.1% YoY increase. It reached 7,878 kilograms (kg), an upswing of 383 kg. This noteworthy surge is primarily attributed to the ongoing technological modernization initiatives within dairy enterprises. However, the growth trajectory encounters constraints due to the dual challenges of persistently low prices for raw materials and the escalating costs since the latter half of the preceding year. This combination of factors presents a significant financial hurdle for dairy producers.

The Murmansk region led the charts with the most substantial increase, recording a remarkable growth of 3,922 kg. Stavropol and Crimea closely followed with notable growth figures of 1,395 kg and 900 kg, respectively. Interestingly, in overall productivity standings, Crimea secured the second position, boasting an impressive 9,235 kg, while Stavropol claimed the fourth spot with 8,908 kg. Komi demonstrated the fourth-highest increase of 840 kg, although its final productivity ranked the lowest among the regions at 5,428 kg. Ivanovskaya region emerged as a leader in both an increase of773 kg and final productivity of 9,526 kg, securing the top position.