Since dairy farmers can’t always predict future dairy trends and milk prices, Mary Ledman, global dairy strategist, relies on more than 30 years of industry experience to explain what’s ahead. Ledman focuses on the key export regions around the world that account for over 80% of global dairy exports.
“The EU produces about 160 million metric tons of milk, and 30% of its production is exported,” said Ledman. “New Zealand and Australia together produce about 50 million metric tons of milk, and 30% is exported. The U.S. produces about 102 metric tons of milk, and exports about 15%.”
It’s no surprise China is a major player in the global milk market. Although China isn’t a milk exporter, it’s the world’s largest milk importer, and 2024 saw the first significant year-over-year production decrease in Chinese milk production.
While China is the number one dairy importer, and although their imports are down, other regions around the world have picked up the slack – primarily Mexico, Indonesia, the Philippines, Malaysia, South Korea and Saudi Arabia. China’s move away from the marketplace has allowed other participants to grab bigger shares.
There’s a divergence between the butterfat market and the protein market, which includes cheese, skim milk powder (SMP) and whole milk powder (WMP).
“Butter is in a trajectory all its own,” said Ledman. “Where there’s butter, there’s skim milk powder. The high butter price is subsidizing the skim milk price, but the combination of butterfat and skim price is yielding good milk prices for dairy farmers around the world.”
Stronger commodity prices, especially on fat, have supported farmgate milk prices.
In clarifying terminology, Ledman explained the difference between non-fat dry milk (NFDM) and SMP: “Skim milk powder has been standardized to 34% protein,” she said. “NFDM is dried skim after separating the butterfat, and protein level varies seasonally. NFDM in the U.S. is often higher than 34% protein, so to standardize, other dairy solids such as lactose are added, which brings it down to 34%.”
Most whey goes to China to feed piglets, making that market a critical component of whey exports – not just from the U.S. but also from Europe.
Cheese exports have grown worldwide, thanks to the proliferation of the Western diet, and most is destined for pizza and fast food outlets.
Butter trade is down 8% this year, which Ledman said is price driven. “Europe and the U.S. are similar when it comes to butter,” she said. “Both are home to large domestic markets. We export less than 5% of our butter; Europe exports less than 10%.”
A substantial portion of U.S. milk goes into cheese, so there’s less milk available for NFDM. California, the largest producer of NFDM, has seen less milk for non-fat production due to bird flu.
Ledman discussed the increase in domestic cheese: “We have additional capacity coming online in the U.S.,” she said. “We’re going to be the home of the lowest-cost cheese in the future. Dry whey prices in the U.S. and Europe have been tighter. Much of the dry whey in Europe is used as demineralized whey in infant formula, and that market has dropped off significantly, resulting in surplus dry whey in Europe and lower prices there.”
The 2016 Trump tariffs caused China to retaliate, which resulted in a significant drop in dry whey exports. “A penny change on dry whey is six cents in the Class III milk price,” said Ledman. “That’s 60 cents per hundredweight that milk prices went down as we lost a significant market to China. U.S. imports to China during that tariff period dropped by 25% to 35%.”
In 2018, the Chinese government decided to expand dairy production by nearly 10 million metric tons, to be accomplished by 2025. They met that goal in 2023.
“Part of what contributed to China’s pullback in dairy imports has also been that they overshot this market,” said Ledman. “They still had very high milk prices in 2022.”
Chinese consumers were in economic distress and could bypass dairy products, resulting in lower consumption and lower prices. The Chinese government pushed the expansion of milk production to over 25 billion lbs., and they accomplished it quickly with support from large dairy companies.
The Chinese dairy herd grew quickly as they imported about one million replacement heifers from New Zealand and Australia from 2019 to 2022. Although New Zealand discontinued the maritime shipment of live animals, Ledman expects that legislation will be overturned in 2025, which means China could once again acquire bred heifers from New Zealand.
Despite major changes in the market around the world, global dairy strategist Mary Ledman believes the U.S. is still the best place in the world to produce milk year-round. Photo courtesy of Bridgestone Americas Inc.
Global supply and demand through 2035 will be influenced by several factors. “India is the world’s largest dairy producer with about 225 million tons, so more than double U.S. production,” said Ledman. “They will try hard to be self-sufficient in dairy.”
She noted that if India has production failure due to poor crop yields, they will enter the market to feed 1.5 billion people.
The heyday for European dairies was when milk quotas were abolished in 2015. “From 2011 to 2023, Europe increased milk production by 16 million metric tons,” she said. “We estimate that EU milk production by 2035 will be down 10 million metric tons, giving up much of the gains they experienced in the previous 12-year period. We see the U.S. increasing about 1.3% annually and gaining 19 million metric tons.”
South America has the potential to increase 5 million metric tons over the next 12 years. In talking with an Argentinian dairy farmer, Ledman learned he’s currently adding 48 robots and will add another 48 robots in an additional expansion.
“We need to be cognizant of dairy demand today is not the dairy demand for 2030 and 2040,” said Ledman. “Much of the dairy industry benefited from China’s rise in population, but they’ve slowed down.”
In China, there are fewer people under age 20, and in the 20- to 50-year-old category, there’s increased purchasing power. “We see China’s population group over age 50 increasing by 100 million by 2030,” said Ledman. “It increases by almost another 100 million from 2030 to 2040.”
Despite adding 120 million people, India’s population of people under 20 also decreased. Their growth in population is due more to longer lifespan than increased birth rate.
Ledman said the growing population of older Americans will likely provide an opportunity to develop nutrient-dense products.
When asked if well-heeled U.S dairy farmers might be tempted to invest in production facilities outside the U.S., Ledman said, “I think the U.S. is still the best place in the world to produce milk year-round with the natural resources we have, with the historically social stability we have.”
by Sally Colby
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