Global Milk Powder Trend – Promoting Global Nourishment

The exports of skimmed milk powder (SMP) from the USA grew at an annual pace of 7 % from 2014 through 2018 as per USDA reports in July 2019.  With regards to the EU, the shipment for the same throttled as of July 2019 moving up by 1/3rd over last year. The EU has reportedly forayed into important markets like China and Indonesia which had ranked 2nd and 3rd largest global markets respectively in 2018 for SMP, with Algeria retaining its position as the principal destination of the EU. While the Philippines, Malaysia, and Vietnam depicted major gains, which are also the important destinations for U.S. SMP in 2018 In 2018, about one-third of the EU’s SMP was exported to these markets. The 2019 export forecast was increased by 15 % to 950,000 tons. The major factor contributing to the growth of SMP, which was estimated at 1 % in 2019 are intervention stocks that have been available at the end of 2018. It was to the tune of 175,000 tons. In 2018, U.S. shipments of SMP to China totaled 21,100 tons, with annual imports that were forecasted to grow by 2%. In 2018, the U.S. supplied nearly 97 % of the total SMP imported by Mexico. Nevertheless, with respect to the aforesaid, resulting from the modernization of the EU-Mexico FTA in 2018, a provision for a duty-free quota of EU milk powder starting at 30,000 tons and growing to 50,000 tons after a 5-year phase-in period, have been made.

milk powder market

Another development reported in July 2019, was that of shipments from New Zealand to China accelerated by 14%, with an export forecast that has been revised at 8% higher to 410,000 tons. Further, the milk powder market also witnessed competition among importers who sought to get whole milk powder (WMP) from New Zealand for the Chinese market under the New Zealand-China FTA duty-free Tariff Rate Quotas of 162,500 tons. Further, according to USDA estimates of July 2019, New Zealand’s share of global WMP was expected to expand during the same year as exports through May have been reportedly high by 25% compared to last year. In 2018, New Zealand reportedly accounted for ¾ of total WMP traded among major exporters of WMP. The same period forecasted a growth estimation of over 80%. It was reported that WMP production had been the priority of milk producers in New Zealand in 2019. Moreover, the market reportedly witnessed a rise in SMP prices which resulted from growth in global import demand for SMP since year-on-year (YOY) imports through September 2019 increased from 15 % to 30 % stemming from markets of China, Indonesia, and the Philippines. Also, the quantum production of milk among major was registered less than the earlier forecasted volume. Above all the stocks of SMP have been low in both the United States and the EU.  Moreover, it should be noted that Chinese imports of WMP between 2015 through 2018 have been growing at an annual average rate of 15 %. In 2019, imports through October are up 23 % YOY.

Whole Milk Powder Trade (Global Imports)

milk powder market

In 1,000 Metric Tons

Source: USDA

These estimates have been deemed favorable for the powder milk market growth, nevertheless, the advent of COVID 19 has led to severe market disruptions, which has resulted in cross-industrial ramifications across the world. As communicated by USDA in July 2020, the EU exports of skimmed milk powder (SMP) have been remarkably slow with cumulative shipments through May till June 2020 have been down by 18 % over the comparable period in 2019. Skimmed milk powder sales also plummeted in key markets such as China which reduced by -21 %, Indonesia that reduced by – 57 &, and the Philippines that reduced by -70 %. Nevertheless, the EU has been exporting substantial volumes of fat-filled milk powder which encompasses dried skimmed milk combined with a vegetable fat such as palm oil, which results in essentially a cheaper alternative for WMP.  Also, exports of fat-filled milk powder through May totaled about 146,000 tons; if the current rate of sales is maintained it is anticipated to reach  a total of 356,000 tons for the year. So far this year, the major markets have been Senegal, Nigeria, and the United Arab Emirates. However, the USDA had reported that exports through May 2020 reached $2.7 billion, which is an increase of 12 % over the same period in 2019.  This was partly aided by the strong competitive position of the U.S. versus EU SMP prices with a differential that was at times over $250 per metric ton (11 cents/lb). Further, from the perspective of market players, the lower sales of milk during the COVID-19 lockdown, and higher milk procurement, the milk and dairy cooperatives in India have reportedly engaged in large scale conversion of into high shelf-life products like milk powder, among others that are anticipated to have partly contributed to a growth of milk powder market. Moreover, WMP purchases by China have been reportedly robust with imports through May 2020 increasing by 2% YOY. Further, an import growth rate of 1 % over 2019 imports has been forecasted by the USDA. Moreover, the Brazilian stocks of powdered milk have been reported to gain increments during the 2nd week of August 2020.

Additional factors that are expected to influence the food and beverage industry, consequently impacting the milk powder market are surmised under the multifaceted issues pertaining to the degree of nourishment of the global population.  To this end, it is important to note that according to the Food and Agriculture Organization of the United Nations (FAO) estimates of 2019, almost 8.9 % of the global population, were undernourished. These factors have led the government of certain nations to initiate various kind of investments and policy incentives which are expected to positively influence the milk powder market. The State Government of Bihar and Rajasthan issued an order to provide milk powder to children of Anganwadi centers under the Integrated Child Development Services (ICDS) Scheme, as communicated by the annual reports of 2018-2019 of Department of Animal Husbandry, Dairying and Fisheries of the Government of India. Besides, the Department of Commerce, Government of India through a Public Notice 23/2015-2020 dated 13.07.2018 had announced an incentive of 10% for exports of all milk and milk products under the Merchandise Exports from India (MEIS scheme). To this end, the State Governments of Gujarat and Maharashtra have announced to provide a subsidy of Rs 50/Kg for SMP, further facilitating the growth of the national milk powder market.