According to Fonterra Cooperative Group Ltd, Chinese demand for New Zealand milk products last year surged more than fivefold from 2008 to about 353 million kilograms. The dairy company forecast that exports to China will more than double to $950 million by 2020, from $400 million last year. [Photo / Bloomberg]

Growing populations, increasing incomes boosting protein-rich diets

WELLINGTON, New Zealand - Global demand for dairy products will jump in the next decade, led by surging consumption in China and India, according to Fonterra Cooperative Group Ltd, the world's largest exporter of dairy products.

China's dairy demand will expand by 36 million tons, almost tripling in value to $71 billion by 2020, Fonterra Chief Executive Andrew Ferrier said at a conference in Rotorua, New Zealand. Consumption in India will grow by 45 million tons, the company estimated.

Rising incomes and expanding populations are fueling demand for protein-rich diets in emerging markets as global food prices tracked by the United Nations climbed to a record in February.

Whole-milk powder rose to an all-time high of $4,958 a ton last month, buoyed by demand from Asia and concerns that dry weather in New Zealand may curb supply.

"There's enormous growth in dairy demand," Ferrier said on Tuesday. "Not just per-capita consumption is going up, populations are going up as well."

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Chinese demand for New Zealand milk products last year surged more than fivefold from 2008 to about 353 million kilograms, Fonterra said.

Exports to China will more than double to $950 million by 2020, from $400 million last year, according to the company's forecast.

India's imports of New Zealand dairy products more than doubled to NZ$162 million ($125 million) last year, according to government data supplied by Fonterra.

Increasing gap

Fonterra, with NZ$16.7 billion in annual sales, sells milk, butter and cheese in 140 countries and accounts for almost 40 percent of global trade in dairy products.

"We're seeing demand go up very, very strongly," Ferrier said. "Imports, although they're going to double we think, you can see the increasing gap, and the increasing gap will be filled by locally produced Chinese milk."

While New Zealand won't be able to meet the forecast expansion in global demand, with production growing 4 million tons by 2019, Fonterra said on Tuesday that it was planning "multiple" dairy farms in China and was evaluating the idea of building farms in India and South America.

The company in October agreed to further develop a dairy farm in China's Hebei province to expand local production. Its farm at Tangshan has doubled to more than 6,000 cows since it opened in 2007 and produces about 25 million liters of milk for local consumption.

"The world is a big place and there's going to be opportunities to partner with customers beyond just New Zealand milk," Ferrier said.

Bloomberg News