Ongoing opportunities for dairy players
thevolume of dairy trade is growing at a faster pace than global
milk production. But Europe is outstripped by Australia and New
Zealand on the global stage.
Dutch financial analysts Rabobank said international travel had created growing demand for products produced in other parts of the world and the latest WTO agreement had given better access for dairy exporters to potential import demand.
Highlighting opportunities for firms working in the international dairy arena, notably finished dairy products, some regions in the world are not likely to ever have self-sufficiency in dairy products, according to Rabobank, while other regions have built their entire dairy industry mainly on their export positions.
"Changes in this landscape of global dairy trade are occurring slowly but surely, driven to a large extent by political measures as well as by individual company ambitions," states the report.
Since 1995, the EU's global market shares have been on the decline for all dairy products except for the dairy ingredients star, and a by-product of cheese production, whey.
Whey is comprised of protein, lactose (milk sugar), minerals (calcium, phosphorus and magnesium) and fat. Traditionally, whey was a by-product with a negative value from cheese production, but in the 1950s the US started to add value to the by-product and since this time the ingredient has seen a considerable rise in demand, notably on the back of the sports nutrition and functional food market which uses whey protein concentrates and isolates extensively.
The development of new functional foods and drinks, particularly adult and sports nutrition products, has led to increased usage of these ingredients, with 2002 consumption of all whey products pitched at nearly 770,000 tonnes.
"Lower levels of price support in the EU and the irreversible global trend towards abolishing export restitutions will further reduce the EU's role in the dairy commodity trade," claims Rabobank.
The report adds that European traders have anticipated this trend by stretching their sourcing network beyond EU borders while European processors are increasingly opting for direct investments in new growth markets instead of addressing these markets through exports.
Nevertheless, state the analysts, opportunities for EU exports remain in cheese, whey products and branded milk powder products.
Australia and New Zealand have been the main beneficiaries of the EU's declining role in global dairy trade, where both countries have the potential and the ambition to play a dominant role.
"In 1999, the combined market share of Australia and New Zealand exceeded the EU's global market share for the first time and three years later New Zealand's market share alone reached a par with the EU's market share," commented Rabobank, adding that this differed compared to the position of the US, whose potential was offset by a lack of ambition, and Argentina, whose ambition is not matched by its potential.
Dairy trade mainly concerns ingredients
Most dairy trade concerns dairy ingredients like skimmed milk powder and butter oil, which to a large extent is used by importers to supplement deficiencies in the local milk supply.
But about half of the whole milk powder trade and the greater part of the cheese trade are in end-consumer products.
The greater part of the trade in whey products concerns whey powder to be used as a feed ingredient. The importance of value-added wheyproducts for high-end food and non-food applications is growing in terms of value, but this significance in volume terms is negligible, claims Rabobank.
The EU 15 remains the world's number one importer of butter. A large proportion of these imports consist of New Zealand butter exported to the UK as part of an agreement that came into force when the UK joined the EU.
Russia has been a more consistent buyer of butter in recent years, although volumes have still fluctuated between 33,000 tonnes and 62,000 tonnes in the last three years. According to the report, imports by the US are also quite erratic and requirementsfluctuate along with the volatile domestic supply and demand situation for butter.
With the exception of Singapore, imports of butter and butter oil have grown, with Iran, Canada and Morocco witnessing the highest rises, and import volumes in the United Arab Emirates and Malaysia declining with the result that they have dropped out of the top 15.
