Tuesday, 14 July 2020
By Kat Jack
The UK generally runs at a trade deficit for dairy products. In 2019 the UK recorded its first dairy trade surplus in volume terms, though was still at a deficit in value terms due to the differences in which products are imported and exported.
Much of the value in a dairy product comes from its constituents, and so looking at our trade balance in terms of fat and protein can provide valuable insight on demand for milk solids.
The UK runs a trade deficit in both fat and protein terms. For fat, this deficit has been shrinking over the last few years. This has been partly due to an improved trade balance for both butter and mozzarella on the back of investments in processing. In addition, product yields have improved alongside increases in milk quality. Typical butterfat and protein levels have moved up to 4.1% and 3.35% respectively over the past three years.
For protein, the deficit had been relatively stable from 2016-2018, but then reduced dramatically in 2019 – shrinking 37% from a 63k tonnes deficit to a 40k tonne deficit. Over half of this improvement in the protein trade deficit came from increased exports of powders and concentrates, predominantly SMP and skimmed milk concentrate. This ties in to strong milk production in 2019, which in turn led to a strong uplift in powder and concentrate production compared to 2018.
With milk production forecast to contract slightly this year, it may be that we see the protein deficit increase again in 2020. However, with the complications of coronavirus and Brexit, it’s difficult to say how changes to the demand and trade environment will affect the protein deficit. We will look at these in more detail in a future article.
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