High fat prices expected for some time

Published 11 June 18

Demand for dairy fats will continue to grow, and production will not be able to keep up with demand. That was the key message from Christophe Lafougère, GIRA Director at the Eucolait conference in early June.

According to GIRA, production of dairy fats rose by an average of 1.94% per year from 2006 to 2016. This slowed more recently, with increases expected to be 1.53% per year from 2017 to 2022.

GIRA analysed consumption trends from the main countries of the world, including China, Russia, the US and EU. These countries are expected to demand an extra 1.8% per year of dairy fat from the market, leaving the rest of the world to fight over a more modest 1% per year increase.

 Global fat balance Jun18

Source: GIRA

In the EU, the usage of the extra fat (339,000 tons between 2017 and 2022) is coming predominantly from increased consumption of butter (42%), cream (21%) and cheese (32%). Historically (last 10 years) the rest of the world has needed 2.4% extra fat per year to satisfy demand. As a result, the 1% available is unlikely to satisfy their requirements, sustaining upward pressure on fat prices.

Demand for protein is also expected to grow, mainly through growth in SMP consumption, but supply should be better able to cope.