Emerging market demand for dairy products is expected to continue to drive European Union (EU) exports and sustain commodity prices in coming years, a European Commission (EC) report has claimed.
According to the document, Prospects for Agricultural Markets and Income in the EU 2012-2022, the key driver for long-term export market prospects remains the “expectation of continued demand growth in emerging economies.”
“Economic growth, increasing population and preference for dairy products” will continue to drive demand for EU dairy exports between now and 2022, it said.
In recent years, the European dairy industry has increased its focus on emerging markets.
The growth of the middle class in markets such as China - and the resulting increase in disposable income - has been pinpointed as the driving force behind an increase in global dairy consumption and demand.
Expansion of world demand
“The continued expansion of world demand, resulting from global population and economic growth and increasing preference for dairy products are expected to be the main drivers, fuelling EU exports and sustaining commodity prices,” said the EC report.
The report adds that between 2012 and 2022, the best export performance is expected to come from cheese and skimmed milk powder (SMP).
Exports of cheese and SMP are likely to expand by two-thirds and triple respectively. In both cases, their share of total world exports will increase to 32%.
Butter and whole milk powder (WMP) exports are, however, expected to deteriorate due to “greater dynamicity of other exporting countries.”
Quotas will be “under-utilised”
Despite continuing demand growth from emerging nations such as China, European Union (EU) milk quota is expected to be “under-utilised” over the next two years.
The milk quota system was introduced in 1984 to address the problem of over-production in the region.
The quota systems are, however, set to be abolished in April 2015. A gradual increase of 1% per year is in place in the meantime.
The EC report claims that by 2014 – one year before the quotas are abolished – EU milk deliveries will be 8.3m tonnes (6%) below the overall quota level.
“Current projections imply that EU milk deliveries would not be able to keep up with the annual increase in quotas over the phasing out period, leading to a steady decline in quota utilisation at aggregate EU level,” said the report.