Australia to Benefit from Rising Meat and Dairy Demand in Asia and the Middle East

12 June 2013 FDI Team

With the agricultural sector currently experiencing historically high commodity prices globally, livestock products are predicted to remain high for the next decade providing key market opportunities for Australia. 

Background

While overall agricultural production growth is expected to slow in the coming decade at an annual rate of 1.5 per cent compared with 2.1 per cent between 2003 and 2012, according to a report recently published by the FAO and OECD livestock product pricing will remain high moving toward 2022. Despite rapid growth predicted in developing states, Australia will remain a key player in agricultural exports particularly in the Middle East and Asia.

Comment

Following the release of the OECD-FAO Agricultural Outlook 2013-2022 last week, Australia is well positioned to capitalise on expected rising demand for livestock products particularly in Asia and the Middle East with commodity prices of meat and dairy predicted to remain high.

Livestock product pricing is forecast to remain high in the coming decade due to reduced inventories of livestock products globally and higher feed costs reducing margins and production. Demand conversely will continue to grow, with developing countries expected to lead this growth significantly into 2022.

Driven by growing populations, increased urbanisation and an expanding middle class, significant dietary changes towards higher protein foods, particularly meat and dairy products is expected to sustain high commodity prices for meat and dairy according to the report. Developed countries within the OECD on the other hand are not expected to experience significant changes in prices as markets are saturated with a diverse number of products and food expenditure continues to represent a low portion of income generation.   

While emerging economies continue to represent a growing portion of economic activity, with 80 per cent of global meat production growth expected to occur within developing countries, ongoing trade deficits, resulting in higher agricultural production imports over exports within parts of Asia and the Middle East, provide an opportunity for Australia to increase agricultural product exports to these regions. In particular New Zealand and Australia are expected to remain the world’s largest sheep meat exporters supplying growing demand in Asia and the Middle East.

The report also identifies global consumption of dairy products, particularly butter and cheese, in developing states will be greater than local production leading to the majority of this growth fulfilled through exports from the US, European Union, New Zealand, Australia and Argentina. 

Despite predicted trends towards greater overall growth in developing states, traditional exporters of agricultural products within the OECD, including Australia, will continue to play an important role in global trade in agricultural commodities and according to the report a large influence on value added processed agricultural products. With GDP estimated to increase to 3.4 per cent per annum on average over the next decade, the 2013-2022 outlook for Australia is positive, with the country’s strong role in agricultural product exports globally expected to continue and lead to increased market opportunities within Asia and the Middle East. 

Sinéad Lehane

Research Assistant
Global Food and Water Security Research Programme

Any opinions or views expressed in this paper are those of the individual author, unless stated to be those of Future Directions International.

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