According to a recent Rabobank report, global dairy product trade remains a growth sector despite recent declines from 2021’s record highs, with several standout trade flows exceeding 3 billion kilograms in 2022.
Dairy trade growth endures
Between 2017 and 2022, dairy trade posted a compound annual growth rate of 1.1%, representing a volume increase of 4.8 billion kg, albeit with peaks and troughs along the way. “Our global dairy trade map visually demonstrates a handful of standout trade flows with annual trade in excess of 3 billion kg in 2022 – notably, New Zealand’s volume of trade to China, US shipments to Mexico, EU exports to the UK, and the flow of milk from Belarus to Russia,” states Michael Harvey, Senior Analyst – Dairy at Rabobank. “Any subtle shifts in the volume of these trade flows can have a profound impact on global dairy market fundamentals.”
Cycling a period of global trade intricacies
Trade between 2017 and 2022 was marked by a range of global events that impacted the direction and size of dairy trade flows. Expansion in global dairy trade occurred against a backdrop of a rewiring of globalization. However, it is worth noting that the dairy trade architecture did not change significantly over this period despite several major events impacting the dairy trade arena, such as Brexit, pandemic-driven disruptions, and commodity price volatility.
New Zealand remains the global export powerhouse as the world’s largest dairy-exporting country, accounting for 21% of the global dairy trade. China, meanwhile, remains the largest dairy product importer by far, with volumes double that of the second-largest importer, Mexico. But since its record imports in 2020 and 2021, China’s industry has been grappling to rebalance the internal market – a situation further compounded by strong domestic milk supply growth and sluggish consumer demand.
Collectively, the EU has the largest export market share (27.7%), but the US dairy industry is pushing forward and continuing its long, slow march into export markets. In 2022, the US commanded a 16.1% share of global dairy exports. While still a distant third, it is the only major exporter to gain market share since 2019, up 3%.
Dairy trade will continue to face shifting market dynamics
“Rabobank expects dairy trade growth to continue over the medium term. However, there will be some subtle shifts that have the potential to further reshape the global trade arena,” notes Harvey.
New Zealand and the European Union will continue to dominate for the foreseeable future on the back of ample exportable surpluses. However, a more modest outlook for milk supply growth in both regions will have implications for dairy trade. Meanwhile, local supply is evolving in China and Southeast Asia, but the medium-term view is that their annual import deficits will increase further until 2030.
The US dairy industry will continue to have a strong footing to win market share and is expected to expand domestic milk supply through 2030. At the same time, fluid milk consumption will remain under pressure, resulting in more milk for manufacturing and more dairy products for export.
The market for global dairy trade has faced, and will continue to face, several global events that are rewiring the trade arena. “While dairy trade remains a growth sector, all dairy companies engaged in trade will be reassessing the supply chain for vulnerabilities in an era of heightened geopolitical risks and potential deglobalization amid a rise in protectionist trade policies,” explains Harvey.