Global Dairy Industry and Trends

World milk production is expected to increase by 1.6 percent annually between 2020 and 2029 and reach 997 million tons in 2029, according to a report prepared by OECD-FAO. This report reveals that the increase in milk yield is highly related to the diet. In countries where grazing-based livestock breeding is carried out, milk production increases are mostly related to the number of herds, while in countries where special feeding is common, production increases due to productivity.

Global Dairy Industry and TrendsAccording to the Food and Agriculture Organization (FAO) of the United Nations, about 150 million households worldwide produce milk. While in most of the developing countries production is carried out in small family farms, in developed countries the transformation to large-scale industrial enterprises continues intensely.

The annual milk production obtained from all these enterprises is approximately 850 million tons. Almost all of this production is obtained from cows, buffalo, goats, sheep and camels. More than 80 percent of the total production from all species is provided only from cows. This rate constitutes almost 100 percent of production, especially in developed countries.

The number of dairy cows worldwide, which was around 136 million heads in 2019, reached 137 million heads in 2020 according to the data of the US Department of Agriculture Foreign Agriculture Service (USDA FAS). The number of animals in question is estimated to exceed 138 million heads in 2021.

India is the country with the highest number of dairy cows. It is estimated that there are approximately 56 million dairy cows in the country in 2020, and that this will rise to 58 million in 2021. The European Union follows India with about 22 million heads. It is estimated that the number of dairy cows in the European Union will decrease slightly in 2021. For dairy cows, India and the European Union are followed by Brazil with 16 million heads, the US with approximately 9 million heads, Russia, Mexico, and China with approximately 6 million heads each.

According to the OECD-FAO Agricultural Outlook 2020-2029 report, 81% of world milk production is cow milk, 15% buffalo milk, and 4% goat, sheep, and camel milk. Total milk production from all types increased by 1.3 percent in 2019, reaching approximately 852 million tons. According to FAO data, this production amount was 843 million tons in 2018.

India is the world’s largest milk producer, making up 22 percent of global production in milk of all types. The US, China, Pakistan and Brazil follow India in global milk production. India, the world’s largest milk producer, increased its production by 4.2 percent in 2019 to 192 million tons according to the OECD-FAO report.

The total milk production of the EU (157 million tons), the US (101 million tons), New Zealand (22 million tons), Argentina (11 million tons), and Australia (9 million tons) was estimated to be 301 million tons in 2020, according to same report. This amount is expected to reach 304 million tons in 2021.

The production amount of cow’s milk alone in the world in 2020 is approximately 532 million tons as per USDA figures. This amount is expected to approach 540 million tons in 2021. In 2020, the largest share in world cow milk production belongs to EU countries with 157 million tons; but on a country basis, the largest producer is the US with 101 million tons. The USA is followed by India with 93 million tons, China with 33 million tons, Russia with 31 million tons, Brazil with 23 million tons, and New Zealand with 22 million tons.

World milk production is expected to increase by 1.6 percent annually between 2020 and 2029 and reach 997 million tons in 2029, according to OECD-FAO report. It is thought that the growth in herds and especially the increase in yield will be effective in the increase in milk production. Factors such as optimization of milk production systems, improved animal health, improved feeding efficiency, and better genetics are among the factors of productivity growth.

Again, it is stated by the OECD-FAO report that between 2020 and 2029, India and Pakistan are expected to contribute more than half of the growth in world milk production and provide more than 30 percent of world production by 2029.

Production in the European Union, which is the second-largest milk producer, is expected to grow slower than the world average due to environmental constraints and limited domestic demand. An annual decrease of 0.6 percent is expected in dairy herds in the region between 2020 and 2029, while an annual increase of 1 percent is expected in yield.

There are also expectations for an increase in North America, where the average yield per cow is highest. The number of dairy cattle in the US and Canada is expected to remain largely unchanged and the increase in production is mainly due to increased yields.

As an important milk producer, New Zealand ranks among the top exporting countries of dairy products. However, milk production in the country shows a very modest growth.

In Africa, a strong production increase is expected from larger herds. It is thought that especially goat’s and sheep’s milk will contribute to the production in the region. During the period of 2020-2029, it is estimated that about a third of the worldwide herd population will be located in Africa, where production will account for about 5 percent of world milk production.

The vast majority of milk production in the world is consumed in the region where it is produced, in the form of fresh dairy products, including pasteurized and fermented products.

According to USDA data, world milk consumption was approximately 190 million tons in 2020. India ranks first in world milk consumption with 81 million tons. India is expected to consume around 83 million tons in 2021. India is followed by the European Union with 33.4 million tons, the US with 21.2 million tons, China with 12 million tons and Brazil with 11 million tons in terms of milk consumption in 2020. No significant change is expected in the milk consumption of these countries in 2021.

The share of fresh dairy products in global consumption will increase between 2020 and 2029 due to strong demand growth, especially in India, Pakistan, and Africa according to the OECD-FAO report. Based on income and population growth, it is predicted that per capita consumption of fresh dairy products in the world will increase by 1 percent annually.

Milk consumption in terms of solid dairy products per capita is also expected to vary widely around the world. The share of processed dairy products (especially cheese) in total consumption of solid dairy products is expected to be closely related to income growth, with changes due to local preferences and the level of urbanization.

Country income per capita and the impact of regional preferences will be important factors driving this change in consumption. For example, per capita intake is expected to be high in India and Pakistan and low in China. In Europe and North America, total per capita demand for fresh dairy products is expected to decline, while demand for dairy fat, such as full-fat drinking milk and cream, is expected to increase due to the health emphasis. In Europe and North America, where cheese consumption is the highest, per capita consumption is expected to continue in the upcoming period.

OECD-FAO report predicts that cheese consumption will increase in areas such as Southeast Asian countries where cheese is not traditionally a part of the national diet. Strong demand growth for butter is also expected in Asia. It is stated that the increase in these regions will be a change in consumption habits, especially due to urbanization and income increases. It is stated that the use of whole milk powder (WMP) and skimmed milk powder (SMP) will continue to be used intensively, especially in manufacturing sectors such as confectionery, baby food, and bakery products. In Africa, where a very limited amount of SMP is produced, the demand for this product is expected to increase rapidly.

According to the OECD-FAO report, the proportion of milk subject to world trade is around 8 percent due to its perishability and high water content. However, it is also stated that China’s liquid milk imports from the European Union and New Zealand have increased significantly in recent years. China’s fresh dairy imports are expected to increase by 3.6 percent annually over the projection period 2020-2029. WMP and SMP’s share in international trade represents more than 40 percent of world production.

The largest exporters in dairy products are the European Union, New Zealand and the US, according to the OECD-FAO report. These three exporters are estimated to export around 65 percent of cheese, 68 percent of WMP, 76 percent of butter, and 77 percent of SMP in 2029. It is predicted that Australia, another exporter, will continue to be a major exporter of cheese and SMP, but there will be a decrease in its market share. Argentina, which is an important WMP exporter, is expected to carry out 5 percent of world exports in this product group by 2029.

On the import side; Japan, Russia, Mexico, the Middle East and North African countries will continue to be major net dairy importers. In terms of cheese, for example, the United Kingdom, Russia, Japan, the European Union and Saudi Arabia are projected to be the top five importers in 2029. China is expected to continue to be the world’s largest importer of dairy products, especially for WMP. Although China has increased its butter and SMP imports from the European Union in recent years, its main supply is from Oceania. Imports from the Middle East and North Africa are expected to originate primarily by the European Union. The US and Oceania are predicted to be the main suppliers of milk powder exports to South East Asia.

The data in the OECD-FAO report reveal that the increase in milk yield is highly related to way of feeding. In countries where grazing-based livestock breeding is carried out, milk production increases are mostly related to the number of herds, while in countries where special feeding is common, production increases due to productivity.

In India and Pakistan, which are among the major producers, and in African countries with growth expectations, animal husbandry is based on grazing and the production is due to the increase in the number of herds. However, growing herd sizes and limited growth in pasture area require intensification of pasture use.

Production in the European Union consists of a mixture of grass and feed-based production systems. In North America, feed-based production is widespread and although a significant increase in herd numbers is not expected, an increase in productivity is projected.

In New Zealand, another major milk producer, milk production is mainly grass-based and yields are significantly lower than in North America and Europe. However, turf management and the efficiency of year-round grazing keep New Zealand competitive. Land availability and increasing environmental constraints are seen as the main constraints on growth, but a transition to feed-based production is not expected in the country.

According to the 2021 Global Feed Survey prepared by Alltech, the production amount in world dairy animal feed is around 128 million tons. The biggest share in dairy animal feed production, where there was no increase between 2019-20, belongs to European countries with approximately 42 million tons. Dairy feed production of European countries decreased by approximately 1.6 million tons (4%) in 2020 compared to the previous year.

European countries are followed by North American countries with approximately 28 million tons in 2020 and Asia Pacific countries with approximately 23 million tons. While production in North America remained at the same level as the previous year, production in the Asia Pacific region increased by 3 percent compared to the previous year.

Latin America, which ranks third in world dairy animal feed production with approximately 22 million tons, was the region that achieved the largest growth (7%) in production in 2020 compared to the previous year.

Covid-19 Effect: Although the food sector is less affected in general by the Covid-19 pandemic compared to other sectors, problems in supply chains of perishable foods such as milk and dairy products have become an important point of loss for the industry. Again, the fact that places that provide mass food services such as restaurants & cafes were affected firstly by restrictions was reflected as a decrease in the consumption of dairy products (although it varies according to consumption habits).

Climatic changes: Especially grazing based production systems are significantly affected by climatic changes. According to the OECD-FAO report, world milk production may be restricted due to unforeseen weather events, especially due to grazing systems. Climate change also increases the likelihood of droughts, floods and disease threats, all of which can affect the dairy sector in various ways (e.g. price volatility, milk yield, cow inventory adjustments).

Environmental regulations: Environmental concerns and environmental legislation to be created as a result of these concerns have a strong impact on the future development of dairy production and can change all current forecasts. Greenhouse gas emissions resulting from dairy operations account for a high proportion of total emissions in some countries (e.g. New Zealand, Ireland), and any change in related policies could affect dairy production. The increasing trend towards sustainable practices such as water access and fertilizer management is additional areas where policy changes can be effective. However, stricter environmental legislation can also lead to innovative solutions that increase the long-term competitiveness of the industry.

Animal diseases: Animal diseases and their spread can affect milk production. Mastitis is the most common infectious disease in dairy cattle and all farm sizes worldwide. It is also the most economically damaging challenge that has a significant impact on milk yield and milk quality. Future advances in awareness, detection, and treatment of this disease may lead to significant increases in milk production through smaller losses.

Antimicrobial resistance: Treatments based on antimicrobials are widely used to control many diseases, including mastitis. The overuse of antimicrobials has raised concerns about the development of antimicrobial resistance that would reduce the effectiveness of existing treatments and require the development of new ones. The evolution of this process remains an uncertainty for the next decade.

Plant-based products: In recent years, the role of plant-based dairy substitutes (e.g. soy, almond, rice and oat drinks) in the liquid dairy sector has increased in many regions. The growth rates of plant-based milk substitutes are strong, albeit from a low base, but conflicting views exist regarding their environmental impact and relative health benefits. As a result, there is uncertainty about their long-term impact on dairy demand.

Domestic policies of countries – bilateral trade agreements, etc: The domestic policies determined by the countries and the special bilateral trade agreements they have with other countries will affect the demand for dairy products and trade flows.

• OECD-FAO Agricultural Outlook 2020-2029, 2020
• Alltech Global Feed Survey 2021
• Dairy: World Markets and Trade, United States Department of Agriculture, Foreign Agricultural Service, Dec 2020
• Gateway to dairy production and products, Food and Agriculture Organization of the United Nations