FDBusiness.com

Supply shortages are forcing China and India to raise their imports of dairy products, according to the latest Rabobank Global Dairy Outlook report. “The demand from these two giants will impact dairy processors, dairy farmers and dairy prices for the coming years,” says Tim Hunt of Rabobank Food & Agribusiness Research. Rabobank has now changed its view on the role of China and India in the world dairy market to 2014.

Dairy imports to China surged in 2009 following the melamine crisis as Chinese consumers looked for safer imported milk powders. Tim Hunt remarks: “Contrary to expectations, imports have pushed higher still in 2010. Some Chinese consumers still prefer imported products, despite official assurances that domestic supplies are safe. And it’s now clear that Chinese milk production levels fell below official figures in 2008 and 2009.”

As domestic demand for dairy rises at 5 to 6% year, China is facing a protracted market deficit. “The factors underpinning the major shift in Chinese dairy imports may last longer than anticipated. Which is why Rabobank has shifted its projections. We expect the higher dairy imports to continue for three more years, not 12-18 months as we previously predicted,” he remarks.

India has traditionally met local dairy demand from local production, but is now facing challenges to its self sufficiency. Demand for dairy products has increased rapidly with the rises in population, income levels and urbanisation. Poor monsoon seasons, and steadily rising cattle feed costs caused a slowdown in milk production last year. Butter actually disappeared from retail shelves for a month in 2009, forcing processors to buy in fats from the world market. “With a population of over 1 billion people, a small market shortfall in Indian terms represents substantial volumes for the international dairy trade. India’s ‘topping up’ of butterfat last year sent it straight into the world’s top-10 butterfat importers,” Tim Hunt: points out.

The Global Dairy Outlook presents three scenarios for the Indian dairy industry in the coming years. Tim Hunt explains: “Rabobank forecasts assume that India will be able to maintain self sufficiency in dairy in general. But it is likely to call on the world market for fats in poor seasons. And when India comes calling, the rest of the world will certainly feel its presence.”