Demand for Dairy

Just four years after buying his first dairy farm, New Zealander Geoff Irwin has found that his property is now worth more than twice what he paid for it. Prices for dairy farms in New Zealand are soaring along with dairy incomes, thanks to a global milk boom.

“There’s a world shortage of milk,” said Philip Goode, manager of international policy at Dairy Australia in Canberra. The combined effects of climate change, trade policies and competition for cattle feed from biofuel producers are said to be seeing the global milk prices rise – and have doubled over the past two years.

However, milk is also the mark of new money and the booming global economy is a primary driving force in the increasing dairy market. Rising incomes from China and India to Latin America and the Middle East means that millions of people are rising out of poverty and into the middle class, and increasing their intake of dairy as a significant protein.

Alex Duncan, an economist at Fonterra, the dominant dairy cooperative in New Zealand and the world’s largest dairy-exporting company, forecasts that simply meeting this new demand will require the addition each year of the equivalent of New Zealand’s entire annual milk output.

New Zealand is one of the world’s largest milk producers, according to IFCN Dairy Research Center in Germany, and is largest exporter of dairy products. Some dairy economists doubt the world’s dairy market can meet this demand and have stated that there is a possibility that the milk-shortages being seen in parts of the world will spread.

Source: International Herald Tribune