UK dairy product availability: Cheese supplies tighten in Q1 2024 as exports get a boost and milk flows head towards butter

Key trends

• A boost in cheese exports in Q1 tightened supplies, in spite of higher UK prices
• Available supplies of butter and milk powders edged up as production grew
• Ongoing geopolitical tensions in the global market and slack demand from China dampened market sentiment, particularly for powders.

UK milk deliveries in the first three months of the current year amount to 3,749m litres (0.8%) more year-on-year. This was mainly driven by an increase in milk deliveries in Northern Ireland, as the rest of GB tightened. Overall, the increase in milk supplies during the first quarter strengthened the production of some dairy products with butter and milk powders registering growth, however cheese production declined due to the better returns offered by butter.

Cheese supplies reduced due to export balance

Cheese was the only product to see less product around and available supplies declined by 23,000 tonnes (-12%) in the first quarter year-on-year. Lower imports and higher exports were the main drivers behind lower available supplies, with imports declining by 11% (12,000 tonnes) and exports increasing by 23% (10,000 tonnes) compared to the previous year. This is in spite of a markedly higher price for cheddar in the UK compared to global markets. Coupled with lower imports, production also declined during the period by 1% year on year.

Butter supplies boosted as processors churn more

For butter, slightly higher production and lower imports and exports has seen availability increase in comparison to where it stood last year. Exports recorded a decline of 40% (6,000 tonnes) in the first quarter year-on-year. Available supplies were estimated to be higher by 11% (6,000 tonnes)

Powders supplies also boosted

Milk powders followed the direction of butter. Available supplies during Q1 2024 increased by 61% year-on-year. Production was reported to be slightly higher during the period, although imports and exports were lower. Exports declined by 30% (6,400 tonnes) on a year-on-year basis. Slack demand from China and geopolitical tensions in the global markets have affected demand.

*product availability is defined as: production + imports - exports

Recent dips in production coupled with stable demand has been a driver in the upturn of prices on the continent. The green shoots of recovery provides some incentive for the farmers to push production. However, milk deliveries will be lower compared to last year considering the yield levels.

Recent inflation figures for the twelve months period ending May 2024, are one of the lowest in three years with the food category being the largest contributor. With easing inflation, market commentators will expect some revival of demand during summer holidays which will be an important watch point in the coming days. The overall macro-economic conditions in the domestic and global markets will have an important role to play.

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