July 18, 2013

Southeast Asian countries' dairy consumption has grown so fast that local supply is unable to meet the demand, creating large trade opportunities and intense competition between international producers keen to capture this rapidly expanding market. 

Demand for dairy in Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam, member states of the Association of Southeast Asian Nations, has outpaced supply. Factors contributing to the growth include high birth rates, rising incomes, improving diets, growth in modern retailing, urbanisation and countrywide school milk programmes.

"We expect dairy consumption across ASEAN-6 to grow by 2.4% per year through to 2020. This creates a requirement for an extra three billion litres of milk which local players are ill-equipped to deliver," said Michael Harvey, an analyst from Rabobank, in a report.

The annual growth rate of 2.4% would mean that by 2020, the region will import 14 billion litres annually, compared to 11 billion litres in 2012, according to the report.

Meanwhile, milk prices rose for a third consecutive time and volumes fell in Fonterra's latest international auction. The Global Dairy Trade-Weighted Index rose 4.9% with an average selling price of US$4,828/tonne, compared to US$2,756/tonne in July 2012.