March 7 2013 07:42 AM

Dairy's success will come from understanding our markets.

by Amanda Smith, Hoard's Dairyman Associate Editor

"The concept of a billion has become devalued as we have gone through the global financial crisis," noted David Hughes, Imperial College-London, at the 2013 Western Canadian Dairy Seminar. Despite our lack of a concrete handle on these values though, by 2050, our world is likely to reach 9 billion inhabitants.

Addressing a crowd of 700 producers and allied industry professionals, Hughes went on to add that as these additional 2 billion people are added to the global population and their incomes rise, protein demand will grow.

A billion of these people will be added to the Asian population. The remainder will likely join the African population. Other counties' populations will remain similar to what they are today. He did note though that the Canadian population is growing, but this isn't internal growth. The majority of this expansion has occurred through immigration.

Emerging nations are where the majority of growth will be achieved in the dairy industry. Hughes, an emeritus professor of food marketing, used infant formula to showcase this growth potential. In 2010, the Chinese market experienced growth of 19 percent and was valued at $7.3 billion.

But going forward, we are likely to see more volatile food prices. This will constrain future dairy demand in emerging markets. In Canada, citizens spend 10 to 12 percent of their income on food. This is relatively low compared to the Philippines, Vietnam and China where the average household spends 50, 40 and 37 percent of their income on food, respectively.

As food prices rise, these households will focus more on purchasing traditional staple foods and cutback on discretionary foods, such as dairy or other proteins.

In developed counties, there will be few opportunities for market growth. This is due to the fact that these nations have slow population growth, an aging population with declining intakes and health concerns related to saturated fat intake.

Canada, Hughes added, is in a bubble when it comes to the global market. While major dairy counties will be a player in meeting this growing demand, Canada will not have a significant role. Charlie Arnot with the Center for Food Integrity, speaking before Hughes, elaborated that Canada made a trade off when they went to quota - they have a stable supply and price but no real opportunity to impact the global market.