Revived appeal of dairy fats sees full cream milk make a comeback

25.10.2017

Full cream milk is making a comeback.

Butter output prospects are being undermined by, besides weak prices of the skim milk powder also thrown off in the manufacturing process, a growing demand for cream, which is accounting for a growing share of dairy fat, in the Asia Pacific region at least.

In part, cream demand is being spurred by increased food service demand in increasingly prosperous Asia.

New Zealand's exports of liquid cream soared from 30,000 tonnes in 2012 to 68,000 tonnes last year, according estimates from US officials, who forecast volumes hitting 90,000 tonnes or more in 2017.

However, in liquid milk too, consumers are shifting back from skimmed varieties to the full-fat type, to judge by the experience of Australia.

'Change in consumer preferences'

In Australia, full cream milk now accounts for 65% of total fresh white milk, up from 55% in 2012, "as consumers have shifted away from skim and other lower fat varieties", US Department of Agriculture staff in Canberra said.

Australian milk sales, July, and (year-on-year change)

Full cream: 119.6m litres, (+3.2%)

Reduced fat: 46.5m litres, (-6.2%)

No fat: 5.0m litres, (-15.5%)

Source: Dairy Australia
"Over 2016, the share of full cream milk increased by almost 10% in volume terms, while sales of low fat milk fell by 6%."

The comments tally with those earlier this month from industry group Dairy Australia, which flagged that "volumes of full cream milk have grown by 8.3%, to 706m litres, reflecting the ongoing change in consumer preferences towards full fat products", also evident in the clamour for butter.

"Consumers' attitudes towards dairy fats continue to evolve."

'Less fat for butter'

Against a backdrop of growing Australian demand for fresh milk, with supermarket sales volumes up 2.5% to 1.6m tonnes over the year to last month, supplies of fat available for other dairy products have suffered a double squeeze.

"The switch back by consumers towards full cream milk has reduced the volume of dairy fat available for butter production," the USDA bureau said.

And this when overall milk supplies are expected to fall for a third successive year in 2017, undermined by weak prices which, alongside drought in some areas and the hiccups at processor Murray Goulburn, have spurred a wave of dairy farm closures.

An estimated 7% of Australian dairy farms ceased operations in the year to mid-2017, "as a result of poor seasonal factors, industry disruption and low farmgate [milk] prices", the bureau said.

Export prospects

The bureau forecast Australia's butter output in 2017 at 86,000 tonnes, falling for a third successive year.

However, it will recover to 95,000 tonnes next year, the bureau said in its first forecasts for 2018, with production expectations supported by the prospect of some revival in Australia's milk output next year, by 200,000 tones to 9.3m tonnes.

"Pasture growth and comparatively low hay and grain costs should support herd rebuilding and a gradual increase in production," the bureau said.

Still, with Australians eating an increasing amount of the country's butter themselves, as "some consumers have switched from margarine to butter for taste and health reasons", the extra supplies will do little to ease the global shortage of the product.

Australian dairy exports in 2018 were forecast rising by a modest 4,000 tonnes in 2018 to 35,000 tonnes – with an increase only enabled by digging into inventories, seen ending next year at an eight-year low.


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