and

coffee

whitener

including

some

of

the

non-dairy

origin.

Production of milk powders increased last year and is expected to continue in the
year 2008-09. However, this growth is mainly restricted to whole milk powder
(WMP) and semi-skimmed milk powder, while skim milk powder (SMP) production
is on the way down. The reason in favour of WMP was the ongoing fat surplus
problem in EU, together with the reduction of butter intervention price. This trend
would continue to remain despite the price increase for butter. For SMP, despite
high market price, production is likely to decline in 2008-09. The reasons are that
milk production would grow only modestly and in most major producing areas of
the world, less skim milk would be available for drying, because of the on-going
growth of the other product markets. In EU, the subsidy for processing skim milk
into casein was set at zero, in October 2008, which dampened the production of
SMP. This is good news for Indian dairying, which has created a large capacity for
SMP production.
World trade in dairy products after a period of relative stagnation,
started recovery in the second half of 2007-08 and it continued in the first half of
2008-09. The recovery is due to prosperity resulting from economic demand.
Export of butter and butter-oil recovered in 2007-08 and this recovery
continued in early 2008-09. The total volume of the world trade in cheese has
accelerated and this trend is likely to continue in the year 2009. The world trade
in WMP continued to increase in the first half of 2008-09, but it seems that
though it would continue in the second half also, it would be at a slower pace.
The reason is that the supply is short and countries like New Zealand, US and
Argentina have cleared their stocks. The biggest exporter of the WMP in 2007-08
was the New Zealand with export volume of more than 0.7 million tonnes, which
is an all-time record. EU was the second major exporter, but with quantities
exported, reduced considerably. The outlook for the trade in dairy commodities
for 2008-09 appears bright. However, since the new market equilibrium, in
respect of prices has to be found, the question is whether international trade in
dairy products will continue its growth in 2008-09 at the same momentum as in
previous years. Because of the price situation in 2008-09, one may ask whether
demand can follow the expected trends, but it would be premature to expect
stagnation in the trade. In established markets, the potential for demand to
reduce slightly can release the additional supplies, which are needed to maintain
the growth of trade. The price rise in 2007 and 2008