The principal stimulant of this increased demand is likely to result from dietary change and overall consumption increases in less developed countries (LDCs) in Africa and rapidly developing countries in Asia, as they abandon largely rice-based diets and adopt a more ’western’ style of eating.
There will therefore be higher export demand for traditional dairy products such as cheese as the world’s population and incomes increase.
As the world’s consumer base grows due both to an increased population and rising incomes, demand for dairy is also expected to rise.
Global trade in the dairy sector will, however, increase at a much slower rate than in the past decade, with the EU and New Zealand dominating the market. By 2030, the EU could supply close to 35% of the global demand. This will focus more extensively on value-added products such as organic products or those with protected geographical indications (GIs).
It is estimated by the International Farm Network (IFCN) Dairy Research Network that between now and 2030, growth of worldwide demand for milk and milk products will be 3 times the level of current US milk production.
According to the IFCN figures, about 876 million tonnes of milk is produced worldwide with Oceania, EU and India among the leading producers. More milk will be needed on the market not only because of increased population, but also to meet increased per capita consumption, due to growing prosperity and worldwide investments in dairy product development.
This higher demand will be covered by higher global milk supply – not by increased land use, but by greater productivity. Current trends in structural changes of dairy farms internationally will continue with growth of intensified farming systems. IFCN forecasts an increased global milk production and demand of 35%.
African demand up by a third
In terms of the processed milk products, China is expected to show the greatest increase overall, with increased population growth (+2.4 % per year) and increasing per capita dairy consumption the main drivers of higher domestic consumption.
But more importantly, African consumption is expected to increase by more than a third by 2030 – a total 73 million tonnes milk equivalent-compared with 2018. In 2030, around 20% of consumption is expected to be covered by imports (around 13 million tonnes milk equivalent).
Not only will trade in milk powders rise, but imports of cheese and butter are also expected to more than double over the period to 2030.
Latest EU analysis indicates that demand in sub-Saharan Africa (SSA) is likely to grow at a faster rate than in the last 10 years between now and 2030. In addition to population growth, urbanisation and income growth are expected to drive higher consumption of fresh dairy products and more sophisticated retailing should boost smaller but more frequent purchases.
Growth in SSA, due to perceived higher rates of lactose intolerance, fermented products (especially fermented milk and yogurt) are gaining in importance. In addition, UHT milk consumption is expanding rapidly, due to its conservation properties
While China is likely to remain the world’s main importer of dairy products, the slowdown in economic growth and increasing consumer prices could slow import growth.
However, given the relatively modest development of production in China, the growing demand for dairy products, by around 1.5% per year, should still lead to increasing imports of close to 2% per year.
By 2030, reliance on imports is expected to remain relatively stable and account for 18% of China’s domestic consumption (taking into account imports of cheese, butter, WMP, SMP and whey powder). Infant milk formula is by far the most important product imported by China in terms of value (US$3.6 billion, out of close to US$8.5 billion imports of all dairy products in 2017).
Rebuilding confidence in Chinese dairy
To rebuild confidence in Chinese dairy produce following the 2008 infant formula contamination scandal, the state has accelerated the industrialisation of production and investment in large-scale farms.
Before the scandal, 70% of dairy farmers in China had herds of 20 or fewer cows. Six years after, the number of small herds had dropped to 43% and industrial units with more than 1,000 head of cattle accounted for nearly 20% of the dairy farms.
To increase productivity of small herds, smallholders were encouraged to move their cattle into special designated zones – known as “cow hotels” – with expert technicians on hand. At the same time, the state imposed tough licensing on farmers, forcing many with smaller herds out of dairy production altogether.
Acknowledging that increasing domestic production will not meet demand growth, China has been buying up land and water resources along with dairies and processing factories across the world.
The Belt and Road Initiative, President Xi’s plan to build road, rail, cable, pipe and port infrastructure on an unprecedented scale to link China to resources and markets internationally, is at least in part about food security.
Launched in 2013, it is expected to cost more than $1tn, and to cross more than 60 countries. It will enable China to access food resources more widely and, thanks to new digital networks, faster than ever before.
The Yili group has already acquired huge dairy processing capacity in New Zealand and talks enthusiastically of being part of a Belt and Road dairy alliance, a new China-led milk road across the continents.
Benefits for EU exporters
The European dairy industry is expected to be a major beneficiary of this increased demand. EU exports of cheese, butter, skimmed milk powder, whole milk powder and whey powder are expected to grow on average by around 330,000 tonnes of milk equivalent per year, says the EU commission.
As for the EU market, close to 900,000 tonnes of additional milk per year would be needed to satisfy its growth for traditional dairy products, mainly cheese. By contrast, European liquid milk consumption is expected to continue decline.
EU milk production is expected to experience a modest increase over 2018-2030, at 0.8% per year on average. Production is estimated at 167 million tonnes in 2018, and should reach 182 million tonnes by 2030. Milk yield should also increase by 2030, 17% above the level of 2017. However, it will be at a slower pace than in proceeding decades due to environmental constraints on further dairy production.
Therefore, while campaigns promoting lower dairy product intake to reduce climate and environmental footprint of livestock products, as well as an increase in lactose intolerance claims, will have a downward influence on the consumption of dairy products, growing consumption of convenience foods worldwide, such as ready meals, burgers and frozen food will result in a higher use of dairy ingredients, particularly cheese.
