Milk and the economy
All over the world, between 650 and 700 billion kilos of milk are produced each year. The bulk of this annual production (over two-thirds) is consumed as milk, yoghurt, cream and desserts. Between 10 and 15 per cent of all milk is processed into cheese. Eight per cent is used to make butter. The remainder is processed into milk powder.
To correctly calculate the levels of milk production and processing, economists use a unit of calculation known as the milk equivalent. This is the number of kilos of milk required to make a specific dairy product. A kilo of Gouda cheese, for example, requires about 10 kilos of milk. So a kilo of Gouda cheese represents 10 milk equivalents.
Leading dairy countries
Which is the number one dairy country in the world? That depends on the criterion you use. India produces more milk than any other country, but its farmers do not deliver all of this milk to dairy plants.
Dairy farmers in the United States are the world champions when it comes to delivering milk to dairy plants.
The world’s biggest milk exporter is New Zealand.
These statistics are based on the figures for 2007.
Within the European Union, Germany is top of the milk production league, followed by France.
The European Union operates a milk quota system. Each dairy farmer is allocated a maximum annual milk and milk fat production quota. If their production exceeds the maximum limit, they must pay a penalty to the European Union: the super levy.
Largest dairy companies
Europe is home to a number of dairy giants whose operations extend across the globe. Measured by dairy revenue, the Swiss-based Nestlé is the largest in Europe (16,861 million euros in 2007). Number 2 is Danone from France (9,241 million euros of dairy revenue in 2007). Lactalis, another French company, was number 3 in 2007. From 2009 FrieslandCampina from the Netherlands will also rank among the top players on this list. FrieslandCampina was created by the merger of Friesland Foods and Campina.
Co-operatives traditionally play an important role in the dairy sector: half of Europe’s top 10 dairy companies are co-operatives. Nestlé and Danone are privately owned, making FrieslandCampina the biggest dairy co-operative in the world.
Supply and demand
Milk is a natural product. Put simply, you could say that a country’s supply and demand is determined by the volume of milk demanded by consumers and the amount supplied by cows.
But the reality is much more complicated. Because milk and milk constituents form the basis of many of the dairy products that are traded in international markets, we really need to look at the global picture.
Demand is influenced by various factors, such as the size of the global population and its purchasing power. Consumer preferences are also a key driver of demand.
Supply is influenced by the feed given to the cow and by seasonal changes. Another factor is whether farmers decide to expand their herd when milk prices are good. And ultimately, the most important factor of all is that enough calves are bred into mature milking cows.
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