The dairy demand from developing countries such as China and India is sustainable, underpinned by a rising middle class in these countries, Fonterra chairman Henry van der Heyden told the Irish Independent.
He expects a steady outlook for the dairy industry despite the economic uncertainties around the world. “It has performed well in recent times despite some tough economic conditions and we expect that to continue.”
Asked if demand from China and India would sustain global dairy prices van der Heyden said: “I think so. A lot of this increased consumption is driven by a growing middle class.”
China’s middle class is expected to reach around 600 million in the next 12 years and the World Bank is predicting that the size of the middle class in developing nations will triple by 2030, to 1.2 billion. India’s middle class is growing rapidly and this is a country which has always consumed dairy and is now finding it difficult to fulfill demand, he said.
Although China has no tradition of dairy consumption, he said, the Chinese government’s health campaign to back dairy as a way of lifting nutritional levels, will speed up the consumption of dairy as part of the local diet.
He was also not worried about the threat of an economic downturn in China undermining global markets.
On criticism that Global Dairy Trade auction is too Fonterra-centric and unrepresentative of global demand, he said the success of the trading system is reflected in its performance despite initial reservations from competitors who did not like the transparency.
“Around 24% of our total ingredients sales went through the platform in the last financial year. In three years, we have achieved sales totalling more than US$3.5 billion. This year, we increased the frequency of trading events to twice monthly, expanded the range of products from four to seven and saw Dairy Farmers of America sign up to trade product on the platform. The results speak for themselves.”
One of the dairy industry’s biggest challenges for the dairy industry is security of the supply chain. “End users of our products, whether they are ingredients customers or fresh dairy consumers, need to be confident that the products they buy are safe. The only way to ensure that is to have control of the supply chain from milk collection through to the end user and to have built-in quality checks and traceability,” van der Heyden told the newspaper.
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