Foodsectornews.com - South America Set To Churn Dairy Profits

South America Set To Churn Dairy Profits

Wednesday, 20 June 2007

The projected growth in the global demand for dairy products spells good news for South American countries, which are set to fill the void between the supply and demand.

The prediction made by the FAO and other specialists of the dairy industry is that by the year 2027, there will be a 20% increase in the global demand for dairy products. The price of milk, on the other hand, will be maintained and countries in South America will assume key importance in the global market for the supply of dairy products, as reported by the news from Merco Press.

With the possibility of increase in production by the countries in the northern hemisphere being ruled out, all expectations are centered on South America. Among these countries, Argentina, Chile and Uruguay, in particular enjoy favorable weather conditions enabling farmers to feed their cows on pasture and leave them outdoors throughout the year. Many South American countries are raising milk production with the region’s net export position being cemented whether as emerging larger exporters or as new exporters.

Low cost production in pastoral conditions appears to be the solution to enable dairy farmers to supply the growing demand due to grain and other supplementary feeds having become highly expensive with no relief in sight. 86% of all US whey exports and 79% of US lactose exports are from North America, eastern and southeastern Asia.

A number of factors are responsible for the growth in demand for dairy exports from South America. The usual source for dairy products to Asian countries, Oceania was plagued by supply problems caused by weather which hampered its ability to cater to the extra demand from the growing economies including China, India and other countries. Thanks to a rise in the domestic milk production and available processing capacity, prospects for the South American dairy industry to step in to fill this gap in the international market look promising.

According to a RNCOS research analyst, due to the number of different factors behind the record demand for US dairy exports expected to continue through the next year, the industry has the assurance of a continuation of a strong global demand. With higher domestic prices expected, demand may decline for certain products like butter, cheese and ice cream. However whey, non-fat dry milk and lactose already command fairly high prices on account of international demand. Therefore, export levels are likely to remain up in the following year.