The dairy industry is crucial in any given nation’s food supply as milk represents a nutrient-dense and adaptable product that can be utilized throughout the food supply chain. The dairy market comprises a range of products from traditional items such as fluid milk, butter, and cheeses to the ingredient market featuring powdered and processed products that are added to any number of food items.Key facts about the global dairy market
Dairy Market Analysis
Key themes affecting the dairy market
The US dairy sector is coming out of a period of low margins fuelled by low dairy product prices. After historically high milk prices in 2014, production increased too quickly, leading to a precipitous fall in prices in 2015 that lasted through the first half of 2019. Depression in milk prices has certainly happened before, but for this round of low prices to happen so quickly after a period of record farm incomes left many operations with debt loads that were unsustainable.
As such, consolidation in the dairy industry remains a major theme; the number of dairy farms decreases at a much quicker rate than the number of dairy cows. This means that active dairy operations continue to grow in size and scale every year. Currently, as margins have improved significantly, the dairy herd has again begun a period of expansion.
Trade disputes have had major impacts on the US dairy market as exports become more and more vital to the industry at large. Tariffs placed by both Mexico and China stifled exports of some dairy products through much of 2019. However, as trade relations warm with major dairy importers, the potential for major US export growth remains positive. The US currently competes in exports with Europe and Oceania. New Zealand, with its proximity to China, has become a major player in the export market over the past few decades. However, as Chinese demand for dairy products continues to grow, increased market share for other regions becomes a distinct possibility, especially if prices from other exporters remain competitive relative to those in New Zealand.
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