Australian milk processors eyeing Indian market

Melbourne: Australian milk processing companies could earn handsome profits by marketing their products in India, which is said to be facing shortages of up to three million tonnes a year.

India`s National Dairy Development Board has forecast milk demand at 180-200 million tonnes by the end of 2020.

According to a report in `The Age`, Australian milk processors and trans-Tasman company Fonterra already has its eyes firmly on the prize.

Australian dairy exports to India have soared 70 per cent in the past 10 years, according to National Australia Bank figures.

Indian exports are worth about USD 200 million annually to Fonterra, which supplies milk powder and pharmaceutical-grade lactose, among other dairy products.

However, the report quoted trade strategy manager James McVitty as saying that Australia and New Zealand could only supply a "small slice" of India`s booming milk demand.

Trans-Tasman milk production totals almost 30 million tonnes a year, compared with India`s 112 million tonnes.

India`s import taxes on milk are also high, between 20-60 per cent.

"The vast majority of that demand growth in India will have to be met by their own growth in local milk production," McVitty said.

Fonterra is partnering with the Indian Farmers Fertiliser Cooperative and Global Dairy Health to complete a feasibility study on a joint dairy project.

The trio hope to establish a pilot farm for 3,000 cows, at a reported cost of USD 40 million.

India`s National Dairy Development Board ( NDDB )) is understood to be supportive of the deal.

The World Bank granted the board almost USD 4 billion to streamline India`s fragmented dairy sector and there are about 70 million dairy farmers in the country, milking an average of two cows each. Of that milk, about 20 per cent is formally processed.

"So 80 per cent is consumed on the farm or in the local village," McVitty said.

National Australia Bank agri-business economist Michael Creed said improving farm productivity could ease milk shortages in developing countries.

"A lot of talk and analysis around this tends to discount the fact that a lot of these developing countries can and will increase productivity to meet their consumption requirements," Creed said.

"But I still think there will be a shortfall, these things tend to take a bit of time to be implemented," he added.

The results of Fonterra`s feasibility study are expected to be released in the coming months.

The Australian Stock Exchange-listed Warrnambool Cheese and Butter also has plans for the sub-continent.