The expected increase in disposable income – particularly in developing countries – will have “big implications” for the international dairy sector, the Food and Agriculture Organisation (FAO) of the United Nations (UN) has claimed.
Speaking at the International Dairy Federation (IDF) World Dairy Summit in Cape Town, South Africa earlier this week, FAO senior policy officer Michael Griffin said that increasing income across the globe will lead to growth in the demand for dairy products.
“When people have more money to spend on different foods, this has big implications for the milk and dairy sector. As people have greater disposable income, history has shown they tend to consumer more livestock products including dairy,” said Griffin, speaking during a session on Dairy Policies and Economies.
“There is increasing demand for dairy products throughout the world and there’s going to be growth in domestic milk production in many countries but there will also be increased trade opportunities.”
According to Griffin, this global dairy demand increase has been largely driven by those countries that have not previously had a habit of milk consumption.
A long list of dairy processors, including Nestlé, Arla Foods, and Fonterra, have made moves to exploit this dairy consumption explosion.
Fonterra-manufactured dairy products have an established presence in South-East Asia and China. The New Zealand-based processor has also set up a number of dairy farms in China in recent years to better meet increasing Chinese demand.
Other firms, including Denmark-based Arla Foods, have boosted their presence in developing nations through distribution deals and joint ventures.
As a result of the consumption increases, these developing countries will soon produce the majority of the world’s milk, said the FAO officer.
“So from that point and into the future, developing countries will produce most of the milk in the world. This means that the product range and the way that milk is consumed either directly as a beverage or as dairy products can be expected to change substantially over the coming years,” said Griffin.
Griffin added, however, that any increase in output will have to come from productivity increases in the industry, as agricultural land is of limited availability.
“In terms of new land, very little new land is expected to come into production. If there is higher production, it will be because of productivity gains.”
“At the same time, production of dairy products and processing is highly intensive in its requirements for water and water is becoming an increasingly scarce resource,” he added.