Strong dairy production in the Northern Hemisphere following a strong production cycle in the Southern Hemisphere will keep exportable dairy supplies healthy in early 2014, and global supply should be adequate to meet the unprecedented demand from China. The big industry-wide question is whether China will maintain the same level of buying. The EU is forecast to increase dairy production by 4% year on year in the first half of 2014, boosting exports. The marginal growth expected in the second half of the year will then be followed by the removal of EU dairy quotas in early 2015 leaving the region open to contribute to the international market. New Zealand is expected to see dairy production between March and May 2014 that is 20% – 30% above the end of 2013 which was adversely affected by drought. Australia is expected to see a 2% year on year milk flow increase because of better weather and higher milk prices. The small increase in production is expected to create a small exportable increase. In South America, drought and slow domestic demand will slow Brazilian dairy production and reduce imports, while in Argentina, economic uncertainty is eroding margins for producers and creating only possible marginal growth. In the U.S. slow economic growth, reduced food assistance program payments and increasing retail pricing will result in modest growth, but supply momentum will drive increase exports in the first half of the year.
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