Rabobank warns of increased competition in the dairy sector

Rabobank has released a report cautioning Australian and New Zealand dairy farmers not to take for granted the 2014 flurry of investme undefined

nt from Asian dairy companies.

In its report ‘Magnetic milk – the lure of dairy investment down under’ – global agribusiness bank Rabobank said that while demand growth in Asia is expected to outstrip local supply capabilities, growth in Australian supply is required.

“Between 2014 and 2020 we expect China and South East Asia combined to account for almost one third of the increase in global dairy imports,” said Michael Harvey, Rabobank Senior Dairy Analyst and report Co-Author, in a statement. “Australia must grow its milk pool to fully capitalise on these trade opportunity.”

Harvey said Australian suppliers were up against significantly increased production capacity in many parts of the world, generating intense competition and the risk of oversupply.

“Import volume growth is expected to expand, but the rate of growth will be slower over the medium-term as the dairy market matures and retail price points challenge consumers who are facing lower rates of income growth,” said Harvey, in the statement.

The report said location, as well as access to high quality, safe milk is driving international investment in dairy down under.

“For the New Zealand and Australian dairy sectors preferential market access and geographical proximity are the magnetic forces supporting the investment flows into this region,” said Harvey, in the statement.

Harvey said it is important for Australian dairy companies entering overseas markets to build on local knowledge to avoid trade barriers.

Rabobank warns that for dairy exporters looking to enter the Chinese market a level of caution is now required, particularly when it comes to nutritional powders and liquid milk. Robobank said that this was due to a tightening of regulations in China.

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