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Dairy exports into the Southeast Asian market are set to surge over the next decade, according to a new report by Rabobank.
In the report, Dairy Export Boom Beckons in ASEAN-6 – With a Push or Pull, Rabobank said the combined annual milk deficit of the ASEAN-6, (Indonesia, Malaysia, The Philippines, Singapore, Thailand and Vietnam), was expected to grow to 19 billion litres in 2030 - up from an estimated 12.9 billion litres in 2020.
A growing milk deficit in Southeast Asia was likely to be a major "pull factor" for dairy exporters looking for strategic dairy export growth, Rabobank senior dairy analyst Michael Harvey said.
"The large populations, combined with increasing urbanisation, a growing middle class with purchasing power and continued development of integrated supply chains will all support dairy consumption growth across the region," Harvey said.
Per capita, dairy consumption rates in the ASEAN-6 were also currently low - in comparison to other advanced Asian economies - which provided significant headroom for growth, Harvey said.
Furthermore, the report said dairy companies would be "pushed" towards dairy export opportunities into ASEAN-6 countries, by rising geopolitical tensions and receding demand tailwinds in China.
"Coming into 2020, China's trade relations with key trading partners were already on shaky ground – particularly so for Australia and the US," Harvey said.
While dairy trade had largely been immune so far, there had been a notable deterioration in trade relations, "which had the potential to reverberate far and wide," Harvey said.
"Slowing Chinese dairy demand is a further factor which will prompt dairy exporters to look at markets outside China, with this expected to ease over the next decade as the rate of growth in per capita income slows."
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Harvey said these factors would likely compel dairy exporters to reassess their export growth strategies and consider increased investment in the ASEAN-6 region.
This was particularly relevant for New Zealand dairy companies that were more trade-exposed than their peers and, consequently, had the highest level of market concentration risk, Harvey said.
"With over 35 per cent of New Zealand dairy trade bound for China and less than 20 per cent heading to Southeast Asia, now is a good time for New Zealand dairy companies to evaluate their portfolios to determine if they are overweight in China and/or underweight in Southeast Asia."