FDBusiness.com

Attractive But Unbalanced Outlook For Global Dairy Market

 Breaking News

Attractive But Unbalanced Outlook For Global Dairy Market

Attractive But Unbalanced Outlook For Global Dairy Market
February 08
15:17 2012

The global dairy market will offer strong growth prospects in the coming five years, but the uneven spread of this market expansion and an era of elevated pricing will create as many challenges as opportunities for key players along the dairy supply chain. This is one of the key conclusions coming from the Rabobank Food & Agribusiness Research and Advisory report, ‘Global Dairy Outlook: Show me the money’.

Rabobank forecasts that the global dairy market will expand at 2.4% pa over the next five years but that growth will be unevenly spread, generating some important market dynamics.

Growth will be highly skewed to emerging markets, with countries like China, India and South East Asia expected to account for more than 80% of market volume growth, while western markets continue to mature. Supplying these growth markets, many of which are already in supply deficit, with safe and affordable milk in coming years will require considerable advancement on many fronts: including the development of safe domestic supply chains in emerging markets and the expansion and marketing of surplus production in export regions. “Tapping into emerging market growth will present a particular challenge for many of the world’s dairy processors, most of which are domiciled in, and still focused on, the EU and US markets,” points out Tim Hunt, global dairy strategist for Rabobank.

Opportunities will also be uneven across product categories. In particular, economic, demographic and dietary trends are likely to see cheese sales underperform the broader dairy market. With sales of higher end whey product set to track a much faster growth path, the strategic value of whey pools is rising rapidly. “The divergence of cheese growth and whey demand represents a major structural shift in the market, and justifies a re-evaluation of ingredient production and sourcing strategies,” he explains.

Rabobank forecasts that solid market growth, supply constraints and a structural shift in the costs of producing milk will sustain high milk and dairy commodity prices over the medium term. But this will not translate to increased profits for all.

The processing sector is confronting enormous challenges from high and volatile input costs, difficult economic conditions and retail power. In general the processing sector has managed to maintain or improve their margins, through a combination of stripping costs, trading to higher value-added products and passing through cost increases to consumers. But experience has varied greatly by sector, with Fast Moving Consumer Goods (FMCG) players like Nestle and Danone faring well, cheese makers also improving their returns, while liquid milk players and major Chinese processors have seen their returns decline.

About Author

mike

mike

Related Articles

Food & Drink Business Conference & Exhibition 2016

Upcoming Events

[eventlist]

find food jobs

The Magazine

F&D Business Preferred Suppliers

New Subscriber

Subscribe Here



Advertisements