Global Milk Prices Rise Forcing Out Big Companies and Allowing Entree to Developing Countries

According to researchers at the International Livestock Research Institute (ILRI) in Nairobi, Kenya, the high-rising prices of the changing global milk market will open a door for developing countries to enter the international milk market.

Global milk prices have risen and they continue to rise. In 2006, the world market price for milk in US dollars was $28 per 100 kg of milk, today it is $60. The total global market is estimated at $48 billion a year. Traditionally, market favoritism and global high quality kept developing countries from entering the global milk market against developed countries with large powdered-milk export businesses.

Current global market prices are forcing large market share manufacturers to find less expensive milk sources. This quest for lower cost milk is permitting developing countries like Kenya to enter the milk export market for the first time. This new competition will actually enhance the world milk supply as dairy cows in developing countries are free-range fed on grasses and crop stalks instead of being fed high-cost grains, according to Steve Staal who is an ILRI agricultural economist.

This low-cost dairy cow maintenance is one factor that will permit developing countries to compete in the world market: the individual dairy farms are small in size but have lower overhead to manage. As an example, Kenya has roughly 1.8 rural dairy farms keeping approximately 6.7 million dairy cows. These dairy farms contribute between 80 and 85 percent of all the milk consumed in Kenya.

Carlos Seré is ILRI's Director General and he has stated that this new market opportunity is presenting challenges as well as opportunities for developing countries. Tropical herd breeds, which are adapted to the harsher conditions of a tropical climate are being hastily cross-bred with non-tropical breeds in order to increase production and attempt to take advantage of the increase in milk prices. But this hasty cross-breeding of unwisely chosen breeds has led to two kinds of problems.