There have been a lot of questions about the direction of the whey protein markets. Prices have remained higher than expected and supply has remained tighter than expected but when we investigate what is happening domestically and around the world we can make sense of it. When figuring this out we need to consider the following. There are many variables that are considered when looking at market direction:

• Economies
o Domestic
o International

• Demand
o Domestic demand
o International demand

• Milk production
o Domestic cow numbers and milk per cow
o International cow numbers and milk per cow
o Weather

• Supply
o Domestic production
o International production
o Cheese production

In 2023, the world produced ~ 549 million metric tons of milk = ~ 1.2 trillion LBS = ~ 1.4 billion gallons. The countries that are most involved in dairy are as follows:

Largest Milk Producing Countries

1. India
2. E.U. (Germany, France, Poland, the Netherlands, Italy and Ireland)
3. United States
4. China
5. Brazil
6. Germany (E.U.)
7. Russia
8. France (E.U.)
9. Turkey
10. New Zealand

Top Dairy Exporting Countries

1. New Zealand
2. Germany (E.U.)
3. Netherlands (E.U.)
4. United States
5. Belgium
6. France (E.U.)
7. Australia
8. Poland (E.U.)
9. Ireland (E.U.)
10. United Kingdom

Countries that imported the most dairy in 2023:

1. China: U.S. $4.6 billion (13.6 percent)
2. Germany: $2.6 billion (7.8 percent)
3. Belgium: $1.7 billion (5.2 percent)
4. Netherlands: $1.62 billion (4.9 percent)
5. Algeria: $1.33 billion (4 percent)
6. Italy: $1.33 billion (4 percent)
7. Mexico: $1.13 billion (3.4 percent)
8. France: $991.1 million (3 percent)
9. Indonesia: $921.4 million (2.8 percent)
10. Brazil: $738.6 million (2.2 percent)

Economic Growth

Domestic

Despite inflation and high interest rates, the economy remained strong for the first half of 2024. The GDP (gross domestic product) for Q1 was 1.4 percent and rose to 2.8 percent in Q2. The compound average growth rate (CAGR) is forecasted to be higher than originally thought and rose to 2.8 percent, but now in Q3 things are beginning to slow. The GDP for Q3 is predicted to be 2.5 percent (still strong).

While there has been talk of recession two of the largest financial institutions rank the risk of recession as follows:

• Goldman Sachs suggests 15 percent

• JP Morgan suggested 35 percent chance.

The FED began reducing the interest rate and economists are suggesting this should stall any concern of recession.

FYI: Recession, as defined by the National Bureau of Economist Research, is as follows: A real recession occurs when unemployment rises rapidly, incomes fall, consumer spending drops and businesses slash production. While we have felt some change it hasn’t been enough to qualify as a recession.

International

Looking at the world economic situation 2024/2025 forecasters are expecting an overall global GDP of 3 percent with slight slowdowns in China, and the U.S. but strong growth in Latin America, Asia, India and Europe.

Domestic Demand

Demand continues to grow at a CAGR of 4 percent. Consumers have been dining out less and spending more on healthy eating at home and the demand for protein enhanced foods is booming.

Better than 60 percent of Americans are looking to add more protein to their diets and it’s more than meat they are looking for. Food manufacturers are finding ways to accommodate the demand for more protein. There was a time when protein was considered a supplement product made for bodybuilders and athletes. Protein powders, protein bars and protein shakes were popular products produced by supplement manufacturers.

Demand eventually grew to include the average fitness buff and then grew again to include the average health-conscious consumer. As the consumer groups expanded so did manufacturing.

Food manufacturers are adding protein to everything they can think of. The average consumer wants more than a protein shake or bar. They want food items like baked goods, confections, beverages and snack foods. Whey protein is not only for the bodybuilder anymore.

One other unexpected cause for an increase in demand is the use of drugs like Ozempic. These are drugs for diabetic patients but are being used successfully for weight loss. One of the side effects is muscle loss. It is estimated that better than 15 million people are currently using these drugs, and many are supplementing the muscle loss with protein and exercise.

While demand continues to grow domestically the demand is growing faster in the international market.

International Demand

When it comes to dairy export, the U.S. competes for business mostly with New Zealand, Australia and the E.U., whose top dairy producing countries are Germany, France, Poland, the Netherlands, Italy and Ireland. These six countries account for 70 percent of the milk produced in the E.U.

The U.S. exports about 16 to 17 percent of its dairy products but if we focus on whey protein concentrate alone last year 2023 the U.S. produced ~ 489,683,000 lbs of WPC and exported ~ 78,848 MT (173,828,300 lbs). Currently a weakened dollar and tight world supply is keeping the U.S. export business busy. The global whey protein market is expected to reach $12.77 billion by 2029 from $8.65 billion in 2024, growing at a compound annual growth rate (CAGR) of 6.8 percent.

In 2007, China became a buying power that changed the way we looked at the markets. China’s buying power pushed supplies lower and prices higher than had ever been experienced before. Since then we have seen extraordinary growth in U.S. export and while we still look at China as one of the biggest market influencers, we need to look at so many other countries as well.

The U.S. exports better than 30 percent of its WPC80 and the biggest buyers are Japan and China (some experts suggest Chinas WPC and WPI CAGR is better than 9 percent through 2029). Growing rapidly are Brazil (forecasted CAGR 8 percent 2024–2029), and India (forecasted CAGR 6.8 percent 2024–2029), but steadily there is continued growth in Mexico, Canada, Southeast Asia which includes Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam. The demand keeps growing as consumers around the world become better educated about the benefits of whey protein!

2024 Supplies Are Tight – Milk Production Is Down

Domestic Production

Production and cow numbers are down from 2023. In 2023 the U.S. produced 226 billion pounds of milk with 9.385 million head of dairy cows. The number of dairy cows in the U.S. is currently ~ 9.34 million head.

Milk per cow is down: in 2023 milk per cow was 24,400 lbs and in 2024 it is 24,230 lbs.

Fun Fact: A gallon of milk weighs 8.6 lbs

• Gallons per cow: 2023 = 2,837 gallons of milk/cow

• Gallons per cow 2024 = 2,825 gallons of milk

International Production

Production in Australia and the E.U. is up slightly over last year while production from New Zealand is down.

• Australia is a small producer of milk with only ~ 1.5 million dairy cows, but they are the third largest exporter. They export about 50 percent of their milk products.

• New Zealand has ~ 5.9 million dairy cows. New Zealand may be the world’s eighth largest dairy producer, but they are the largest exporter. They export better than 95 percent of their milk to more than 130 countries.

• The E.U. is home to ~ 19.7 million dairy cows producing ~ 160 million metric tons with an approximate 7653 KG (3,471 lbs) of milk per cow and exports about 10 percent of their production.

China is the second largest producer of WPC:

Forecasts for 2024:

1. U.S.: Expected to produce around 42,614 metric tons.

2. China is projected to produce approximately 42,047 metric tons

3. E.U. is estimated to be around 40,000 metric tons

Although China produces a great deal they still don’t produce enough to keep up with the demands of 1.4 billion people.

New Facilities Will Help Increase Supply in 2024 and 2025

There are several new cheese/protein plants opening in the U.S. between Q4 2024 and early 2025. There are also a handful of cheese and proteins producers that have recently renovated and upgraded existing facilities to increase production. All this together will help increase the supply of both WPI90 and WPC80 by an estimated 10 percent each.

In Conclusion

The next couple months will give us better insight into the direction of the economy. While unemployment has fallen in September, hiring is slowing down. The GDP dropped from August 2.5 to September 2.0 it is obviously slowing for the moment but with the FED dropping the interest rate it could help boost confidence. Obviously, there are some mixed signals, but most economists don’t believe if anything there may be a slight recession.

Looking at milk production forecasts for 2025, the world’s largest producers including the U.S., the E.U., New Zealand, China and India are expected to see an increases in cow numbers and milk per cow so this will help on the supply side. India is expected to double their capacity in production.

As far as current supply, we will continue to deal with short supply and high prices but the additional plants and increased production from existing plants along with increased production and processing in the world market will help ease the supply shortage and we should see a softening in price sometime early in 2025. According to the cheese market news prices are forecast to move lower from current levels but hold above long-term averages. NIE

Paul J. Knox has been involved in the dairy, food and supplement ingredients industries for more than 20 years helping build and boost the bottom line. As a researcher, writer, formulator and vice president of sales, he has driven startups and existing companies’ sales as much as $40 million in as little as eight years. As an expert in the dairy industry, Knox has been writing dairy market reports and forecasting for his customer base since 2007. Knox served his country for four years in the Air Force as a computer tech and has a bachelor’s degree in psychology from the University of Maryland. For more information, visit www.loannenterprises.com.