Exports to Dominate Expanding Global Dairy Market

GLOBAL - Exports are the main driving force for the European milk market and one of the main targets for these exports will be the emerging nations and China in particular, writes Chris Harris.
calendar icon 30 June 2014
clock icon 4 minute read

However, for the rest of this year, the Chinese market may become more difficult for exporters as the country has already built up large stocks of whole milk powder over the last year.

The prospects of growing export markets for the global dairy sector have built an optimism in the industry that analysts believe is set to stay for some time.

How companies, processors and farmers adapt to the growing global market will be the challenge for the sector in coming years.

This was one of the main messages from the Dairy UK seminar on The Global Game and How to Play It in London.

Kevin Bellamy, senior analyst at Rabobank’s Food and Agriculture Research and Advisory department said: “In the first quarter of 2014 high farm gate prices and lowering feed costs have brought a surplus of milk onto the international markets and prices have fallen.

“Inter-connectivity of markets is leading to more complex price discovery, broader impact of market shocks and increased market volatility.

“The global dairy industry has become hugely dynamic and will change out of recognition in the coming five years.

“The pace of change is getting faster and the UK has already entered a new era.

“As a result players will need to continue to adapt to significant changes both at home and abroad.”

In the first four months of this year the major dairy producing countries in the world saw a seven per cent increase in production, with half the growth generated by Europe – most of it in Northern Europe.

“Countries have been gearing up for expansion and in Europe production is booming,” Mr Bellamy said.

“Most of this has been met by a growth in exports.”

He said that while China soaked up most of this growth in production and growth in exports, with exporters attracted by the high prices they could achieve in China, because the country has now accumulated significant stocks, it is likely to reduce its forward purchasing.

China’s imports for the first four months of this year had risen by 68 per cent year on year.

Now, following four years of rising commodity prices in the dairy sector, Mr Bellamy said that prices are expected to soften in the latter half of this year.

However, prospects for the future of exports around the world are good, for while the developed nations are seeing a slow down in demand with the US dropping by 0.5 per cent and the EU dropping by 0.4 per cent, the emerging countries of Brazil, and China have growing markets.

The Russian market, which was also growing has been affected by the crisis in Ukraine and might be hit by sanctions from the EU, Mr Bellamy said.

However, Ukraine could offer another outlet if the EU steps in to help the market there.

“The outlook is that the market will grow again with the developing countries dominating,” he said.

“For the developed countries there is not much room for expansion.”

He said that most of China’s supply from the export trade will come from Oceania, but by 202 the EU’s supply will be 7.5 per cent bigger than it is now and China will still offer an attractive outlet.

Because of the volatility of grain prices and the changes in the weather, price volatility in the dairy sector is going to remain, but the removal of quotas in the EU will help to increase production despite a continued rise in production costs.

Benoît Rouyer the director of economic and regional affairs at CNIEL – the French Dairy Inter-branch Organisation – said: “The European milk sector has radically changed its course over the last few years.

“Adaptability to price volatility is a continuous challenge, but our vision of the future is more optimistic than it was seven or eight years ago.

“The competiveness gap between Europe and Oceania has narrowed considerably since 2010.

“Today most dairy producing regions in Europe consider export to third countries as their main driving force for growth.

“European dairy companies are ready to expand on the growing world market and to satisfy the rising demand for dairy products in emerging countries.

“European dairy companies have been rather dynamic in terms of investments over the last few years, while dairy herds are growing again in most European countries.”

Dr Judith Bryans, chief executive of Dairy UK added: “In view of global supply and demand, it is necessary for the UK industry to be fully aware of the fast changing international picture and the myriad of opportunities it presents.”

© 2000 - 2024 - Global Ag Media. All Rights Reserved | No part of this site may be reproduced without permission.