Magnetic Milk

What are the magnetic forces and advantages that put Oceania at the focal point for Asian dairy investment? Firstly, China and South-East Asia will struggle to meet their own rising appetite for dairy in coming years. Importantly, New Zealand and Australia produce significant milk surpluses on Asia’s doorstep with geographical and preferential access to many key Asian markets.

Opposites attract

The Rabobank report “Magnetic Milk: The Lure of Dairy Investment Down Under” says 2014 was a particularly active year for Asian investment in the Oceania dairy sector. Investment in the Australian and New Zealand dairy sectors—particularly from Asian dairy companies—is not a new phenomenon. The original wave of investment was driven by the desire to tap into Australia’s dairy market, which by regional standards was large and growing.

“The second wave of investment is being fuelled by different motivations, as across Asia demand for dairy imports is set to grow as these economies struggle to lift self-sufficiency in dairy production,” says Food & Agribusiness Dairy Analyst Michael Harvey.

“Oceania offers advantages in competitive production costs and geographical proximity and reduced tariffs which provides superior access over their global peers. This is the fundamental reason that Asian companies have invested offshore.”

Evolving investment models

But another subtle shift is occurring. The investment models are also evolving, with recent capital investments mostly coming in the form of strategic partnerships. This is important for dairy exporters in the Oceania who are looking for assistance to help build the required supply chain into Asia.

“Medium-term demand for dairy products in Asia is expected to continue to outpace the region’s ability to increase its own milk supply, which will drive import growth. Rabobank forecasts indicate that China and South-East Asian countries combined will account for almost one-third of the increase in global dairy imports between 2014 and 2020,” says Harvey.

The recent spate of activity, and the likelihood Oceania will face low milk supply growth going forward, means there are fewer options available to secure supply in the region for latecomers from Asia. Consequently the investment horizon for Asian companies will need to expand to other geographies.

Find out more about opportunities, growth, and how funding has underpinned both independent projects and strategic partnerships with New Zealand and Australian companies in the full report, “Magnetic Milk: The Lure of Dairy Investment Down Under.”

Where to go from here

  • Michael Harvey

    Senior Analyst - Dairy
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  • Emma Higgins

    Senior Analyst - Dairy
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