Global dairy market will be depressed through 2015

Subject

Outlook for the global dairy products market.

Significance

Increased production by dairy exporters in late 2013 and early 2014 eroded prices of dairy products traded on international markets, mostly butter, cheese and milk powders. This decline accelerated from mid-2014 due to reduced Chinese imports and Russia's embargo on food imports from several dairy exporters; the two countries together account for 22% of global dairy imports. Prices for internationally traded dairy products have fallen by more than 45% since mid-2014 as export supply, though scaled back, still outstrips demand.

Impacts

• Rising Chinese dairy output over the longer run could fundamentally alter the global market.
• Dairy prices could remain subdued beyond 2016 if global oil prices do not rise.
• Russian embargo will hit EU dairy exporters, but falling production costs will boost their competitiveness.