Poland is responsible for the vast majority of the increase in EU milk production
EC data shows that EU milk production in the period from January to April this year. was higher by 1.0%. y/y. This is not a particularly good result considering the positive calendar effect (longer February), as analysts from the PKO BP SA bank point out in the latest Agro Navigator.
“Daily production increased by only 0.2%. y/y. In the face of recorded supply declines in the USA and a weak second part of the season in New Zealand, the milk supply of the world's main exporters is still in a decreasing trend. Poland is responsible for the vast majority of the increase in EU milk production (44%). It increased supplies by nearly 5% in the same period. y/y.” – analysts point out.
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GDT: Dairy product prices are back on an upward trend
Price increases due to higher demand
Low dynamics of annual production, as well as recovering demand for dairy products, favor price increases, according to analysts.
“The FAO dairy product price index has remained above the level from last year since mid-2024, after recorded declines since February 2023. In June, the index increased by 6.6%. y/y vs. +3.8 percent y/y in May. The biggest impact on the change in trend had increases in butter prices (36% y/y), which were the most expensive in two years," they add.
“The increase in butter prices is supported by growing global demand, driven in some markets (Europe) by the improvement of consumers' income situation. Over the last year, the ratio of butter prices to the prices of fatty plant products has improved, as evidenced by a strong increase in the consumption of this product in Poland in 2023 by 10%. y/y at 12%. decline in margarine consumption (according to the Central Statistical Office – household budget survey)," we read in the report.
Import demand for dairy products from China is decreasing
Analysts indicate that import demand for dairy products from China continues to decline due to the increase in production in the country.
“Particularly visible is the decline in Chinese imports of skimmed milk powder (-35% y/y in the period January-May '24), whey (-15%) and infant formulas (-40%), although attention is drawn to the growth of Chinese butter imports by 8 percent and cream by 9%. y/y, which partially confirms the thesis about the continued high demand for milk fats," experts say.
According to the Central Statistical Office data, these trends are confirmed. The value of Polish exports of dairy products to China in the period from January to June this year. decreased by 46 percent y/y at 4.7 percent overall decline in exports of this category. Sales of milk powders decreased the most, by 62%. y/y.
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EU: Milk production increased in April
Outlook for the second half of 2024
According to analysts, increases in the prices of dairy products have been observed since the second quarter of this year. will be reflected in milk purchase prices in Poland in the coming months.
"The better situation of consumers, conditioned by an increase in real wages, will also have a positive impact on the demand for dairy products, as will the improving results in milk processing compared to the weak 2023 in this respect. At the same time, the production growth rate is still low – FAO expects production in 5- six major exporters of dairy producers in the world will grow by only 0.3% in 2024. – will support this scenario," we read in the report.
Analysts from PKO BP SA forecast that the annual dynamics of milk purchase prices in the country will average in the second half of this year. will range from -4%. up to +6 percent y/y.
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