Rabobank changes view on future dairy role of China and India

Rabobank said that China in particular has a structural deficit that will be difficult to erode in coming years.

Price impact ​

As Chinese and Indian consumers buy more and more dairy products, demand in international markets is likely to rise putting upward pressure on prices.

“Another source of demand has arisen for internationally traded dairy products, and that demand will be difficult to fill without a sustained period of high prices to encourage more milk contributions from higher cost regions,”​ said Rabobank.

This is not to say, however, that prices are set to rise much further than they already are as buyer willingness to pay will always restrain price hikes in dairy.

But China and India are tipped to have a big influence on world markets. Rabobank argues that it is imports from these emerging markets combined with the aftereffects of the Russian drought that have kept prices afloat recently.

“Only vigorous buying from Russia, in the wake of a savage drought, and the ongoing strength of Chinese imports looked set to save the market from a substantial price fall as 2010 was drawing to a close.”​

Processing opportunities ​

In addition to playing a bigger role in international dairy trade, Rabobank predicts that China and India will offer major opportunities for processors.

It said both markets offer opportunities for export growth, selling of know-how and services, or investment on the ground in the manufacture of milk or dairy products.

Meanwhile, international processors can expect to see more of Chinese companies, in and outside the borders of China. This trend has already begun to take shape. Two Chinese companies, Mengniu and Yili, have entered the Rabobank list of the top-20 biggest dairy companies over the past two years.