Dairy

As prices of dairy products in world trade descend from their historical peak in 2005, the key questions are how far will they fall, and whether a higher price plateau will be sustained over the medium term. The answers to these questions lie in the changing nature of key forces evolving in the dairy market, as it becomes ever larger and more global in scope. One driver is clearly the rising demand for dairy products world-wide, stemming from assumed solid income growth particularly in Eastern Asia, the Middle East and North Africa. But urbanisation and globalisation continue to affect the demand for storable and tradable dairy products which meet consumer demands for fats and proteins. In many developing countries, improved processing facilities are being established through technology transfer from foreign direct investment by established developed country firms using locally supplied raw milk. In urban markets, retail chains are providing standardised quality products which meet changing consumers’ needs. In many developing countries demand for milk products is growing more rapidly than is milk supply. In this respect, the developments in India, the world’s largest milk producer, and in China, the world’s fastest growing milk producer and consumer, are key to the evolution of world dairy markets.