Dairy exporter Fonterra has forecast strong fundamentals for the sector over the next ten years.
A substantial increase in China’s net deficit for dairy through to 2025, along with net deficit increases in India and the rest of Asia, will strongly benefit Fonterra’s exports of dairy from Australia and New Zealand, which will both increase their dairy surplus in that time, according to the company’s research.
In its November update, Fonterra is estimating China’s dairy deficit will grow from 12 billion tonnes to 23 billion tonnes by 2025. Asia – excluding China – will grow its deficit from 13 to 19bn tonnes, while India will grow its own deficit by roughly 7bn tonnes.
Australia, meanwhile, will increase its dairy surplus from 2 to 3bn tonnes in that time, while New Zealand – one of the world’s biggest dairy exporters – will increase its dairy surplus from 20bn tonnes to 28bn tonnes.
Fonterra chief executive Theo Spierings, according to the AFR, said the persistent oversupply of milk on global markets, which has brought dairy prices down in recent months, would slow down.
“In addition, an increased portion of product is being sold through bilateral customer agreements for a premium on prices achieved on GDT [Global Dairy Trade auctions],” he added according to Fairfax.
Fonterra handled 945,000 tonnes of milk in the first quarter of 2015/16 – up 0.6% – but its revenue was down 17.6% to $3.6bn.