My estimate for 2018 global milk production suggests another 9 million metric tons (MMT) of milk supply growth in 2018. That is a repeat of the 2017 global milk production expansion. The 9 MMT expansion compares to an average expansion over the 2000 to 2016 period of 6 MMT. U.S. Foreign Service officers located overseas develop regular attaché reports on key agricultural commodity markets including the dairy industry.

USDA will release their latest look at world dairy markets in mid-December with the Foreign Agricultural Service’s Dairy: World Markets and Trade Report, but news on 2018 global milk supplies is already beginning to surface as many dairy-related reports are now available. The USDA circular will provide another important piece of information that will help set the stage for 2018 milk prices.

North America, Latin America, Europe, and Oceania regions show the largest growth in annual milk supplies. Two back-to-back years of 9 MMT expansions would suggest more pressure on global milk prices in 2018. Continued strong demand for dairy products, especially dairy fat, will be necessary to offset milk supply growth.

The release of milk supply reports in the last month tends to confirm supply growth in 2018. The Mexican report suggests milk production there will grow by 280,000 metric tons (TMT) over the 2016 to 2018 period due to better management and continued genetic improvement of the Mexican dairy herd.

The European Union anticipates modest growth in milk supplies in 2018 of 750 TMT. This follows no growth in milk supplies in 2017. The EU countries showing growth include Poland, which is expected to grow 750 TMT in 2018 relative to 2016, and Ireland, which has seen around 600 new dairy farms recently.

The Australian report expects a 200 TMT recovery in milk production in 2018 following a 400 TMT decline this year, while the New Zealand report shows a 400 TMT jump during the 2016 to 2018 period driven in large part by greater milk yields.

There are still many factors that could slow the growth in global milk supplies in 2018. Weather will remain a wildcard, and recent lower global dairy product prices might also help to limit milk production growth. However, the anticipated supply expansion suggests that demand for dairy products must remain strong in 2018 to move the additional milk without compromising price. The global outlook remains an important piece of information for producers in setting 2018 marketing targets.

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(c) Hoard's Dairyman Intel 2017
November 13, 2017
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