Over the next decade (2019-2028), global milk production is projected to increase by 1.7% per year, according to the latest outlook from OECD-FAO with production forecast to reach 981 million tonnes by 2028.

While global average milk yields are expected to increase at an average of 0.4% per year, the majority of the growth in production is predicted from expanding herd sizes (1.2% per year). This is in contrast to the previous decade, and is driven by herd growth in countries with lower yielding animals.

India and Pakistan are forecast to account for half of the global production growth. By 2028, India and Pakistan together are forecast to account for 30% of global milk production. Meanwhile production in the EU is expected to grow at a more muted level than the global average.

Global consumption of fresh dairy products is expected to increase by 1% per annum over the next decade, a figure slightly ahead of the current rate, and driven by an expanding population coupled with rising incomes in developing countries.

Therefore at a global level, growth in milk production is set to exceed the expected growth in fresh dairy demand.

In contrast, this year is actually showing the reverse trend. Global milk supplies are forecast to increase by just 0.3% this year while global demand is expected to increase by 1.8%. Tightness at a global level is providing support to markets.

In recent years, there has been a stronger demand for milk that other milk solids at a global level, and this is expected to continue.

Butter prices are expected to decline over the next decade, in line with other agricultural commodities. Meanwhile, skimmed milk powder (SMP) prices are actually expected to increase over the next decade. Intervention stocks have weighed down the market in recent years, but with all of the intervention stock now sold, SMP prices are expected to recover from the relatively low base.

With the increase in global milk, production of the main dairy products are due to increase, with half of the cheese produced globally, expected to come from the EU by 2028.

In some regions, growth in demand is expected to outstrip supply, providing further export opportunities for the key milk supplying regions.