Dairy production and products
 

Markets and trade

The marketing of surplus milk improves income, creates employment in processing, marketing and distribution, and contributes to food security in rural areas. In developing countries, the largest share of milk is marketed through informal channels, i.e., without licensing or regulation. This is mainly because most consumers do not want to pay for formal processing and packaging, preferring to process the milk themselves through simple practices such as boiling. As a consequence, the difference between farmgate and consumer prices is generally smaller in the informal market.

The dairy market is often among the most heavily regulated agricultural markets. In developing countries, policies are generally designed to reduce dairy imports and promote domestic production, to improve the livelihoods of farming households and reduce import expenditures. Nonetheless, it is likely that in the future many developing countries will not be self-sufficient in dairy production and will thus be increasingly dependent on imports of dairy products.

The share of total dairy products traded internationally is relatively small, at about 13 percent, mostly because of the highly perishable nature of many milk products. Milk products can be classified into non-tradable fluid (i.e., liquid milk) and tradable, manufactured products (e.g., butter/ghee, condensed milk and milk powder).

Markets and trade facts

  • It is estimated that more than 80 percent of the milk marketed in developing countries is handled by informal market traders.
  • Informal dairy chains are the main link between rural, small-scale dairy producers and urban markets (with growing demand for dairy products).
  • The sale of milk from rural areas to urban centres allows the transfer of funds from wealthier urban centres to poorer agriculturally based communities.
  • The marketing of dairy products in many developing countries is constrained by the seasonality of the milk supply.
  • Milk products account for about 6 percent of agricultural exports.
  • The dairy products that are most traded on the world market are butter, cheese and milk powders.