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‘ASEAN tigers’ offer growth opportunities for Australia’s dairy sector

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article image Michael Harvey

A new industry report by global agribusiness banking specialist Rabobank reveals that burgeoning demand for dairy from ASEAN nations is creating substantial trade opportunities for dairy export countries including Australia.

The report ‘Dairy – Milk for the ASEAN-6 Tigers’ says the ASEAN ‘six majors’ (the six largest economies of the Association of South East Asian Nations – Indonesia, Thailand, Malaysia, Singapore, the Philippines and Vietnam) should be part of all dairy exporters’ global growth strategies, but particularly for Australia given its competitive advantage in these markets.

The rising demand for dairy in the ASEAN-6 region is underpinned by favourable economic and demographic conditions. However, the rising demand-supply gap can be filled by imports, presenting a significant trade opportunity now and in the future.

Report author Rabobank senior dairy analyst Michael Harvey says the ASEAN-6 dairy arena is one of the last remaining unconquered battlegrounds for all dairy exporters, but they may need to rethink their export strategies to unlock the full potential and maximise profitability.

Highlights of the report

ASEAN-6 market growth

Over the past decade, the collective volume of dairy products imported into the region has been growing at about 4% per annum. Dairy trade flows to the ASEAN-6 region in 2012 surpassed 1.6 million tonnes (11 billion litres in milk equivalent) and equated to an export value of more than USD 5.5 billion.

By 2020, these markets collectively are likely to consume an additional three billion litres of milk compared to their consumption in 2012.

ASEAN-6 countries will exhibit annual growth rates in dairy consumption that are well above the world average. With per capita dairy consumption rates among the ASEAN-6 nations very low by global standards, the potential for growth is huge.

Growth drivers

The ASEAN-6 markets are characterised by a mix of factors, which will support continuing growth in dairy consumption. These include overall high birth rates and young populations, rising incomes and the emergence of the middle-class, improving diets and an increasing focus on health.

Mr Harvey also mentions the introduction of school milk programs in some countries and education on the benefits of dairy nutrition, as well as a growth in modern retailing and food service, which is increasing consumers’ exposure to dairy products.

Local supply

A common feature across the ASEAN-6 markets is they are all dairy ‘deficit’ countries, already heavily reliant on imports. While local production is growing, output remains constrained and the milk gap is more than likely to widen.

According to Mr Harvey, local farmers face difficulties increasing output significantly, meaning local milk is unlikely to close the deficit.

Challenges for exporters

The report however, warns of challenges for Australian exporters, despite the positive dairy dynamics in the ASEAN-6 region. Increasing competition from other exporters is one such challenge. Australian dairy exporters looking to succeed in the ASEAN-6 dairy arena need to have the right export strategy and make a long-term commitment to these markets.

Export success is not guaranteed despite having a competitive advantage due to geographical location and a rich tradition of exporting dairy products to these markets.

According to Mr Harvey, Australian dairy processors have already undertaken investment to capture the opportunity, but more will be required including having a solid and expanding supply base that will ensure a strong reputation as a reliable supplier.

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