December 4, 2015

Lower milk imports, bigger inventories to challenge dairy industry in 2016

2015 is a buyer's market for dairy and the same condition may apply for 2016, given the large productions and brief demand, according to Alan Levitt, the vice president of communications with the US Dairy Export Council (USDEC).

These periods contrasted with other years which were relatively in the favour of sellers, Levitt explained. With Russia and China's declining dependence on imports, it would be a challenging season for next year.

The current situation is indeed reflective of the industry's predicament: a weakening market over the last 18 months despite steadily growing productions since 2010, an additional five tonnes to yearly outputs.

For China, the country's imports grew steadily until 2013, followed by a significant dip and coupled with rising domestic production by about 10% annually, DairyReporter.com reported.

For Russia, the Federation had shunned off much of the world's dairy supply.

Hence, the combination of milk imports for these global monoliths tallied to 10 million tonnes this year, compared to 18 million tonnes in 2014. 

"That's eight million tonnes of milk, or 11% of the world's milk, (has nowhere to go)," said Levitt. Nevertheless, milk productions will continue to grow in 2016 as suppliers seek for quantities proportionate to the import levels of 2014.

Levitt also pointed to the double digit growth of imports for several countries, although inadequate to compensate for losses resulting from lower deliveries to China. Market recovery is not likely to come anytime soon, with "inventories that hang over the market", particularly Europe with its biggest skim milk powder inventories in five years, he added.

Furthermore, milk stocks had doubled the acceptable market level, at more than 25,000 tonnes and could increase before the end of 2015.

The US is also facing a similar situation as well, Levitt said.