Attractive but unbalanced

The dairy outlook for the next five years is, according to Rabobank, the agricultural market analysts, like some of the people you dated in university – attractive, but unbalanced. Which is good in a way. You may not want the market to stay that way forever, and indeed stability is a desirable thing, but sometimes, being with attractive is fun, even if sometimes you wonder what is going on in their heads most of the time. So, Rabobank predicts a decent rate of growth, at 2.4 per cent over the next five years. This is good news and as it states, dairy is to some extent, “the envy of the food world.”

But growth will be lopsided, and emerging markets such as China, India and southeast Asia are expected to make up over 80 per cent of market volume growth, while the established markets such as the EU and US  sit and mature like cheese. The challenge as the bank sees it, will be to provide these new markets with safe and reliable milk in the coming years. Thus, we can all start investing in companies that supply pathogen detection testing and dairy companies that are helping to supply the ever-increasing rate of milk demand in the countries. Tim Hunt, global dairy strategist for Rabobank, remarks that most of the dairy companies currently focus on the EU and US markets, but this will have to change now, it seems.

What part of dairy is expcted to be the big winner in this volatile market? Whey products, but cheese will lag behind. Liquid milk processors are not likely to fare that well either, and have seen returns decline. Indeed, the recent Wiseman takeover is but one example of this trend.

Then again, dairy has long been marked by imbalances and volatility. Some of the players are changing, but the game remains the same, and dairy is still a good-looking industry.