India’s Thirst for Dairy to Stand Out in Restrained Food Markets

(Reuters) – A fast-growing milk market in India will stand out amidst a trend towards more stable agricultural markets in the decade ahead as an era of booming demand led by China fades, the OECD and FAO said on Monday.

Higher productivity will cover the lower pace of consumption growth, curtailing prices of staple food commodities that are mostly expected to show a slight decline in real terms, said the Organization for Economic Cooperation and Development and the United Nations’ Food and Agriculture Organization.

An easing in Chinese growth coupled with smaller worldwide population increases and less vigorous expansion of crop-based biofuels should all restrain agricultural markets, the OECD and FAO said in the report covering 2017-2026.

“The last decade has seen unprecedented growth in the demand for agricultural products,” they said. “For most commodity groups, including cereals, meat, fish and vegetable oil, growth rates (in the next decade) will be cut by around half.”

While during the previous 10 years, population increases and rising per capita consumption contributed about equally to overall food commodity demand growth, only dairy, sugar and vegetable oils were expected to see significant gains in per capita consumption in the decade ahead, the organizations said.

The projections may offer little comfort to farmers and trading companies, who have been grappling with lower farmgate prices and smaller margins along the supply chain.

India and also Pakistan were fuelling a surge in fresh dairy supply and demand, which was expected to turn India into the world’s biggest milk producer ahead of the European Union.

“The growth in fresh dairy consumption is exceptional, with the result that fresh dairy shows the highest consumption growth rate among the key commodities,” the report said.

India’s thirst for milk illustrates an increasing impact it is anticipated to have on global markets, as it overtakes China as the world’s most populous country in the coming decade.

The jump in Indian milk production, forecast to almost triple over the first quarter of this century, also shows how dietary patterns continue to contrast, according to the report.

Fresh dairy demand represents the main source of additional protein in India, whereas in Southeast Asia fish intake is more important and in sub-Saharan Africa, access to protein remains limited by income and distribution constraints.

China would continue to support global food demand growth but at much lower levels, notably in pigmeat, where household consumption was expected to level off, the OECD and FAO said.

Exports would remain concentrated among a small group of countries, particularly soybeans.

In dairy, India was not anticipated to be a significant exporter given huge domestic demand to cater for, with the EU seen posting the biggest increase in dairy export market share.