Last year, there was a flurry of investment by Asian dairy companies, mostly from China, into the Australian and New Zealand dairy sectors, but this ongoing growth should not be taken for granted.
According to Rabobank's recently released report ‘Magnetic milk – the lure of dairy investment down under’, a specific focus for overseas investors in Australian dairy has been on securing access to liquid milk and infant formula.
Report co-author, Rabobank senior dairy analyst Michael Harvey said a quest to secure access to a high-quality, safe milk pool was driving international investment in dairy down under.
“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,” Mr Harvey says.
He said for NZ and Australian dairy sectors, preferential market access and geographical proximity supported investment.
With demand growth in Asia expected to outstrip local supply growth capabilities, and hence drive global trade in the medium-term, many Australian and NZ dairy exporters are positioning themselves towards Asia, the Rabobank report says.
Mr Harvey said "Oceania" processors, were working to build extensive distribution networks and local knowledge to tap into key growth export markets.
"Strategic partnerships can help smooth market access and thwart the impost of regulatory trade barriers.”
He said Australia needed to grow its dairy supply to capitalise on opportunities, as NZ already had.
He warned the increase on import volume growth would slow in the medium-term as the dairy market matured and retail price points challenged consumers who were facing lower rates of income growth.
“At the same time, there is significant investment in capacity in many parts of the world generating intense competition and the risk of oversupply," he said.
“Complicating matters, regulation has been tightened, particularly in the Chinese infant formula category, and is still proving unpredictable.”
