Milk float diplomacy
25 April 2014
Recent protectionist legislation could harm export centric food industries, Canadean reports.
According to new research by Canadean, export centric milk industries are facing challenges from increasing legislation and quotas of neighbouring countries, intending to shelter their own industries from imports. This is the case for countries such as Belarus with proposed restrictions from neighbouring countries Ukraine and Russia. If situations like this continue, large export driven dairy industries would be negatively impacted, whereas local producers could be bolstered. Canadean Analyst Michael Wiggins notes that “when the Belarusian government wishes to expand the export segment of its dairy market by 60%, it will directly compete with its neighbouring countries which have already led to temporary restrictions. Most recently by Lithuania, in an attempt to ensure its own local producers would not be marginalised.”
Interestingly, Lithuania was itself the recipient of increased Russian milk standards last year affecting their export market. The situation arose when Russian officials announced they would stop imports from Lithuania immediately due to perceived weaker quality controls.
It is often believed that the level of quality and safety standards are more easily guaranteed in locally produced milk products when compared to imported products. However, in rare cases countries import products to solve a failure in quality controls. The notable example being China which began to increase imported milk products from New Zealand due to the melamine crisis domestic producers suffered in 2008. This crisis also caused a tense diplomatic situation between China and Taiwan. Relying on foreign producers comes with inherent risk and in 2014 China was hit by a botulism scare, when Fonterra, an exporter of milk products from New Zealand, recalled its products as a precautionary measure due to potential contamination. As of March 2014 Fonterra have accepted the charges against them relating to this incident. “With China expected to approach a 5% share of the global white milk market towards the end of the decade, these concerns and issues are worth staggering sums of money. If quality and reputation cannot be regained by domestic producers, this potentially huge market will pour money into the pockets of competing nations” says Wiggins.
On a global scale, these quotas and scares currently only serve to coax the market in general directions. However, as countries like China become increasingly important to the overall health of the global market; Canadean expects prices to be influenced, not only by farmers and outlets, but also politicians.
The flavoured drinking yoghurt from Mengniu, launched in 2013, hold 11% of the total value of the Chinese market for all dairy products tracked by Canadean.
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