Key points:

• Available supplies of most EU’s dairy products edged up in Q1 2024
• Butter is an exception with lower production dragging down supplies
• Overall supplies of powders remained in positive territory
• Exports of butter and SMP have dipped while those for cheese and WMP gained marginally

EU’s dairy product availability edged up in Q1 2024 after having been mostly lower in 2023. Butter has bucked the trend and available supplies continue to decline amid a decline in production. Milk deliveries in EU in the first quarter of 2024 increased by 1.5% to 35.29 billion litres year-on-year. Increase in milk deliveries bolstered the production of cheese while that of butter and SMP remained on the lower side.

 Butter supplies nosedive as processors churn less

The available supplies of butter fell primarily due to lower production and imports. Export volumes also remained lower during the period. Demand was limited as buyers were well secured for Q1. However, retail demand towards the end of the quarter was seen to be improving. Higher cream prices limited churning rates for butter.

Good retail demand, lower processing cost boost cheese supplies

Cheese available supplies were higher in Q1 2024 driven by a large increase in production and higher imports. Exports remained marginally higher during the period. Good retail demand incentivised processors to push production. Coupled with this higher milk fat availability also contributed to higher production.  Processing cost remained lower due to decline in energy cost supporting.

Overall supplies of powders in positive territory

Availability of SMP supplies increased by 9.0% year-on-year in Q1 2024. Though production was lower, imports increased by 19.6% year-on-year. Exports were lower by 11.0% year-on-year. China was the major contributor to the decline followed by South Africa, Middle East and Asian countries.

WMP production remained almost flat year-on-year in Q1 with processors using more milk supplies for cheese over powders. Market demand outside of contracted volumes was very quiet. Available supplies declined modestly by 1.9% following steady production and imports and marginal increase in exports.

In 2024, the European Commission expects milk deliveries to increase 0.4% year-on-year due to higher yields and stabilising milk prices according to the latest EU short term outlook. This will lead to higher production of dairy products. Going forward subdued global demand is likely to weigh on dairy exports growth. Higher production paired with subdued demand will lead to higher supplies in the coming months. The overall macro-economic situation in the global market and policies by the new governments in France and Spain will remain an important watch point in the coming weeks. At the same time, there is increasing policy and legislative pressure to achieve national and EU-wide environmental objectives, and to further increase animal welfare standards.

1Available supplies = production + imports - exports

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