November 24, 2016

World dairy trade seen to further slow down in next 3 years

Global uncertainty in politics and economy, plus the factors that slowed down dairy trade in the past three years, will likely further decelerate international trade in the coming years, a new report released by agri lender Rabobank said.

According to the report, entitled "Strong Headwinds Weigh on Trade Growth" and released on Nov. 17, none of the issues that dealt "massive blows" to the trade in dairy products in the last three years have been resolved and that therefore a slower growth rate than in recent years are most likely to be experienced. These issues include the Russian trade embargo, the slowing of demand growth from China, the impact of low oil prices on demand from oil-exporting countries and the strengthening of the US dollar.

Exacerbating these issues was the expansion of production surrounding the removal of production quotas in Europe, which resulted in a period of extremely low world prices.

Kevin Bellamy, Global Strategist Dairy at Rabobank said, "The Russian ban will be in place at least until 2017. Demand from China will continue to grow but at a slower rate, oil prices are forecast to remain at around the USD 50 per barrel mark, and the dollar is forecast to maintain its high value against other currencies".

Population growth-driven

"As a result, dairy trade is likely to grow at a slower rate than in recent years, driven more by population growth than per capita consumption increases", he added.

Asia will be the exception in the slow trade as it is seen to continue to be a highly competitive battleground for exporters from around the globe. However, according to Rabobank, "all of this must be overlaid with the potential for the renegotiation or cancellation of trade agreements following the US election results".

Looking at the future, the report said that "perhaps even more than in recent years we live in uncertain times where the new US administration, uncertain Russian relations, uncertainty in the Middle East, Chinese economic performance, Brexit, and the fate of TPP (Trans-Pacific Partnership) and TTIP (Transatlantic Trade and Investment Partnership) can all have a major effect on dairy trade development".