Wednesday, 6 May 2020
By Patty Clayton
The outlook for 2020 highlights the impact of the changes to dairy demand as a result of the coronavirus pandemic.
Milk production across the EU-27 is projected to expand by a modest 0.4% in 2020, a similar growth level as seen in 2019. This is less than previously forecast, as growth in yields could be limited by compound feed shortages, processor driven milk reduction schemes and the potential reduction in the size of the dairy herd.
Potential issues with labour availability and working practices in factories, particularly around the spring production peak, is expected to influence the dairy product mix.
The most likely home for the surplus milk is in SMP processing, which is less labour intensive. Stocks look set to increase as both exports and domestic use are forecast to drop from 2019 levels. Exports will be limited by good product availability and weaker import demand in Asia, while domestic users will favour cheaper stocked product to fresh SMP.
Higher butter production is forecast on the back of strong domestic demand. Although industrial demand is not expected to return to its previous levels during 2020, the higher retail sales is expected to keep domestic butter usage stable. However, exports are expected to drop by 10% from 2019 as global demand remains weak and US stocks remain high. As a result, stocks are likely to see some build-up during the year.
Overall, cheese demand should remain balanced. Growth in retail sales and exports in 2020 are thought to be sufficient to offset the reduced foodservice demand and balance the predicted 0.6% increase in production. However, as home dairy consumption differs in composition to foodservice usage, some categories of cheese could see a drop in demand.
The EU milk price equivalent is expected to decline in the coming months in line with the downward trends in butter and SMP pricing. With stocks expected to build for these products, and global demand to remain subdued, these trends are likely to continue over a longer period.
excludes the UK and assumes frictionless trade between the EU and the UK in 2020
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