Could the UK become an exporter?

Published 19 December 12

uk exporter

Last year, global dairy trade totalled over six million tonnes of product (the equivalent of 49bn litres of milk) with 15 countries - led by China, Russia and Mexico - accounting for over 70 per cent of the trade on a volume basis.  While the EU is not a big importer from outside the region, it remains a big trader within, with Germany leading the charge, particularly on cheese imports.

Overall, world dairy trade is big business and it's expected to rise dramatically - although estimates vary.  The FAO expects the trading market to grow at around two per cent each year over the next 10 years; Fonterra believes it will grow by over 70 per cent by 2020.

So where will the supply come from?  With market volatility likely to feature heavily in future dairy markets, those producers and countries with better mechanisms in place to deal with this are likely to be better positioned to take advantage of growing demand, says Duncan Pullar, DairyCo Director. Countries with low production and processing costs will be best placed to develop exports. In GB we have the right potential, but one or more processors will have to develop the opportunity for farmers to benefit.

"It's also important to note that large imports don't preclude the ability to develop a vibrant export market," says Duncan. "Look at Germany - it's the EU's largest cheese exporter and importer.  In theory, the UK could import low value Cheddars and export high value speciality cheeses and powders. This happens successfully with other agricultural products."

The report lays out some of the biggest opportunities for the UK industry, which advises steering away from the export of mainstream dairy goods or undifferentiated bulk commodity products, and focusing instead on high added value products.

"The strength of the UK's year-round supply, provenance and quality image is highlighted, alongside our lack of 'scale' processing capacity that would lend itself to bulk products," Duncan explains. "It's important to play to our unique advantages.  This points to selling larger volumes of high-value products."

The report describes the steps along this path, which include a need for attitude change within the whole industry.  "We need to engage with major international processors and markets to understand their needs, and communicate the opportunities and challenge better across the whole industry.  But more than this, we need to create a confident, outward-looking culture - such as international benchmarking of production, processing and sustainability, and recognition and reward of successful export developments.  Developing export opportunities takes time because the relationships need to be built before significant trade can happen."

The full Export Report and evidence base can be downloaded from the DairyCo website.  Although China is identified as a large potential opportunity other markets in EU, Russia and the USA may be just as rewarding for GB product.   

Summary of UK export opportunities (MENA = Middle East, North Africa) 

exports table

 


The growth of the middle classes in Asia is expected to cause some of the biggest consumer changes in the next 10 to 20 years.  The OECD Development Centre estimates the number of middle class consumers will grow from 1,845 million in 2009 to 4,884 in 2030, but almost 90 per cent of this growth will come from Asia. Increases in affluence, urbanisation and numbers of working women will combine to create a boom in dairy intake. 
 

 

John Alvis from Lye Cross cheesemakers near Bristol reports that exports across his range of traditional cheeses have risen from 5 per cent to 15 per cent in the last year, with 25 per cent targeted for next year.  "The increase has come from several different countries," he says.  "The beauty of having such a viable export market is it strengthens your selling power in the UK. We're now in a position where we no longer have to be just price-takers; we can negotiate on more equal terms. And, if agreement can't be reached, I know there will be buyers overseas happy to take it." 

 

Rabobank has recently published a report called 'NZ dairy - from a torrent to a trickle', suggesting that the country might have now achieved peak output and, due to environmental constraints, will need to turn to reducing costs, and increasing yield per cow instead of herd size.  With New Zealand's low cost base the key to its success, this could means that NZ exports could fail to keep pace with growing demand in the future.  This would open up opportunities for other exporters in the future.