Bolstering performance of the dairy sector

B K Mukhopadhyay | Published: August 04, 2019 21:12:32 | Updated: August 07, 2019 20:44:57

At the very outset, we should have a look at what is happening in the dairy sector across the world.

It is very heartening to note that the Bangladesh government has decided to halt smuggling of cattle from India to ensure fair price for local farmers and traders. The government is doing all that is necessary to ensure supply of healthy cattle and safe trading.

Very recently, the Ugandan government announced plans to register all farmers and their cattle, including issuing 'birth certificates' for the animals, so that it can trace their products. According to the Ministry of Agriculture, Animal Industry and Fisheries of Uganda, the international market demands that all countries producing food for the European market should have proof of its traceability. "They want to know where the [meat and crop] products are coming from. They have been impounding and banning all consignments from Uganda if they find one box with issues," said Vincent Ssempijja, the Minister for Agriculture, Animal Industry and Fisheries this month.

A recent report compiled by the Food and Agriculture Organisation (FAO) shows that Kenya's population will double to 96 million by 2050. Nearly half of these people will be living in urban areas. As a consequence, the demand for animal sources [of] food will exponentially increase. To respond to the demand, the livestock sector will transform deeply. FAO said that the population of cattle and chicken will increase by 94 per cent and 37 per cent, respectively, between 2015 and 2050. Currently, the country has 18.8 million cattle (14.3 million beef cattle and 4.5 million dairy cows), 26.7 million goats and 18.9 million sheep. The report pointed out that cattle and poultry contribute about 70 per cent of the total animal production output, estimated at Sh 167.2 trillion in 2016.

A DEEPER LOOK: It has been estimated that global milk production will expand at a slower rate, a far slower pace than in recent years. Growth prospects have been affected by a number of factors as international markets have been responding to the historically high international price levels of the past couple of years. On balance, prospects for the world's six major milk product exporters, which supply around 77 per cent of global trade, have improved somewhat in recent months. Their milk production is now expected to hover around 40 per cent of global production. But production growth is slowing in some regions, due to high feed prices and high opportunity costs for pasture. In some areas, new issues have surfaced that may affect consumer demand. In particular, food safety concerns are currently clouding the dairy outlook.

If the trends in the recent past are of any indication: commodity-wise and country-wise pictures do not reflect a very rosy picture indeed. Skimmed milk powder exports are now expected to rise, particularly due to recent past increased exports from the United States, which have been larger than expected. Exports from New Zealand, Australia and the European Union are anticipated to decline marginally, but are likely to be higher than previously expected. Imports to both African and Asian countries are expected to increase, stimulated by comparatively lower prices. Imports by Mexico are expected to continue at previous levels, given the importance of and support for its social feeding programmes.

THEN WHAT IS WRITTEN ON THE WALL? : It is becoming clearer that regional trade shares are changing, and this may mark the new emerging structure of the world dairy market. Europe's role as a major source of dairy supplies for trade has diminished significantly, as has that of Oceania. But those of the Americas and Asia have grown. The United States may export, increasing its trade share to around 12 per cent. Conversely, the trade share of the European Union is set to fall.

Elsewhere in Asia, strong output growth has been forecast for the large traditional milk producers: India is expected to sustain its normal growth, while Pakistan looks set to increase production as high internal prices have stimulated investments in the sector. However, all of Pakistan's increased production will be absorbed domestically. South America is all set to be the fastest-growing milk production region. Argentina's milk production growth has been limited by lower returns due to large export taxes on milk products, whereby taxes are adjusted to maintain lower domestic prices. This policy induced some milk producers to participate in national strikes and blockades in early 2008. Brazil may soon become the second largest exporter in the region, or even the largest if current trends continue over the next several years. In other parts of Latin America and the Caribbean, Mexico, one of the world's largest importers of milk powders, will post limited milk production gains given high feed costs and a shortage of domestic available feed.

As a whole milk production in Africa is anticipated to be consistently below world average growth, showing weaker supply response to the price spike. But the United States' dairy sector responded significantly to attractive internal and external prices in the last couple of years. However, this growth is lower than expected, due to the downturn in profitability experienced so far this year, as indicated by the milk to feed price ratio. This has limited milk yield growth and has induced higher culling of cows. In addition, the recent appreciation of the United States dollar has lowered the competitiveness of the United States' industry in international markets compared with the situation of even a couple of years back. In Canada, higher feed costs have induced yet higher target prices, and this has limited domestic market growth; production is expected to remain stable.

In India, today the animal husbandry and dairy sector has occupied a very significant position by providing cheap nutritional food to millions of people. Additionally it is helpful in generating gainful employment in the rural sector, particularly among the landless labourers, small and marginal farmers and women by supplementing their family incomes. Livestock continues to be the best insurance against the vagaries of nature like drought, famine and other natural calamities.

As things stand, India now has vast sources of livestock and poultry. These play vital roles in improving the socio-economic conditions of rural masses. India ranks first in respect of buffalo, second in cattle and goats, third in sheep, fourth in ducks, fifth in chickens and sixth in camel population in the world. India has around 57 per cent of the world's buffalo population. The Livestock Sector not only provides essential proteins and nutritious human diet through milk, eggs, meat, etc., but also plays an important role in utilisation of non-edible agricultural by-products.

The future of the global dairy sector cannot be deemed as gloomy as the realisation has been growing fast in regards to importance or contribution that the sector has been extending over the years.


Dr B K Mukhopadhyay is a Management Economist.


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