Dairy Industry International Trade Assignment

Overview of the chosen sector/ industry/ market

History of Dairy Product

Dairy item has been utilized by people since the start of hundreds of years to give both new and storable nutritious nourishments. In a few nations a large portion of the milk created is expended as crisp purified entire, low-fat, or skim milk. In any case, most milk is fabricated into more steady dairy results of overall trade, for example, margarine, cheese, dried milks, frozen yogurt, and consolidated milk.

Cow milk is by a long shot the vital kind utilized all through the world. Different creatures used for their milk generation incorporate including buffalo (in India, China, Egypt, and the Philippines), goats (in the Mediterranean nations), and sheep (in southern Europe). In the mid 1800s the normal dairy cow created under 1,500 liters of milk yearly. With progresses in creature sustenance and particular reproducing, one dairy animal presently delivers a normal of 6,500 liters of milk multi year, with a few cows creating up to 10,000 liters (AL-Asfoor, Abdullah, 2012).

Dairy products are provided by two kinds of firms which are proprietary organizations and cooperatives. After some time, the quantities of both firm types have declined and the span of those remaining has, by and large, expanded. A considerable lot of the proprietary are either vast organizations or their backups. Cooperatives extend from little, either by volume or on the other hand enrollment criteria, to expansive. Proprietary organizations have inclined toward the liquid milk and solidified items organizations, while cooperatives have played significant parts in the hard manufacture item advertises (Handy and Henderson,1994).

Discussion should include, but not limit to the market size, major producers/exporters and importers, specific resources needed

1. 1. Market Structure

Market structure generally implies to industry focuses, the degree of item separation, and the simplicity with which new firms can enter an industry (Sheldon and Sperling, 2001). Market structure decides the lead of firms and industry, remarkably evaluating arrangement. Direct thus decides financial execution, which commonly is estimated by benefits or value cost edges.

Manchester and Blayney (1997), inspected the market structure of the US dairy advertise what's more, reasoned that a important methods for development of organizations in the dairy business has been merger or procurement. Extra limit and volume were normally accessible at bring down cost by procurement than by building new limit and competing for deals. Tozanli (1998), demonstrated that as the consequence of mergers and acquisitions the quantity of European dairy firms is getting littler and this focus procedure is infinite in the European dairy industry where the significant tendency is toward an evidently oligopolistic market structure.

1. 1. International Trade of Dairy Products

International trade in milk and dairy items has displayed very vast changes throughout the most recent couple of decades, bringing about changes to open arrangements in western nations and their choices quit financing items in this industry. All things considered, a basic change in the shape and type of the principle exporters and importers has occurred on the worldwide dairy scene following this arranging for of the market. Volumes delivered and exchange to a great extent financed items like milk powder and spread have been broadly influenced and demonstrated noteworthy falls though high esteem items like cheese or matured milks have been saved from this basic change (Commonwealth Bank, 2010).

Most exchanged dairy items are handled modernly on a substantial scale by multinational organizations. Thus, we can imply to a market that is progressively focused between few giants from western nations, however which are progressively tested by powers in as of late industrialized developing economies (Rabobank, 2001). The last conform to universal directions while regarding worldwide competitively in light of volumes and costs. Nonetheless, every one of these organizations from developing economies doesn’t have a similar situating with regard to international guidelines and models that oversee worldwide exchange agricultural and food items.

1. 1. Major producer/exporter

One of our major producer of dairy products in Malaysia is the Zaman Dairy Farm Malaysia. Zaman Dairy Farm is located in the lush greenery of Bentong Pahang. Due to the vast land in the natural environment, Zaman Dairy Farm produces fresh milk to every Malaysian families. The main dairy cattle population in Malaysia was initially the Local Indian Dairy(LID) cattle. The animals in the farm expressed excellent adaptability to the local climate. Crossbreeding of Bos Taurus dairy breeds and zebu dairy breeds was considered the best alternative to improve the productivity in the local dairy industry.

Other than that, the another major producer of dairy products is Malaysia Dairy Industries Pte Ltd (MDI). Malaysia Dairy Industries Pte Ltd is incorporated as a joint venture between Singaporean partners and the Australian Dairy Produce Board.. Malaysia Dairy Industries Pte Ltd, along with the subsidiaries, produeces, distributes and markets dairy and beverage products to customers in Singapore and internationally. Products such as sweetened condensed milk, evaporated milk, UHT milk, pasteurized milk, cultured milk, soft yoghurts and yoghurt drink are offered by Malaysia Dairy Industries Pte Ltd (Company Overview of Malaysia Dairy Industries Pte Ltd, 2018).

1. 1. Major importers

Dairy products such as cheese, yoghurt, ice cream are imported to our country. The food industry used milk proteins as a structural ingredient for many food items. All imported dairy products including the ingredients for the food processing industry, must be certified halal, but subject to change as the Department of Veterinary Services Malaysia (DVS) is updating the dairy import protocol. With around 50 percent of the market share, New Zealand is the largest supplier, followed by Australia and United States. United States is competitive in producing the dairy powders, while New Zealand gears which the sectors with butter and cheese and Australia is focussed at yogurt, ice cream, butter and cheese (Malaysia-Agricultural Sector, 2018).

Provide relevant statistics or trends

According to the Figure 1 below, it shows the production of milk beverages in Malaysia from 2013 to 2017. The milk beverages produced are approximately 140 million litres in year 2017 which shows a drop compare to year 2016 (Production of milk beverages in Malaysia from 2013 to 2017 (in million liters), n.d.). There is a decrease in the production of milk beverages because the consumers are more willing to support the imported milk products.

Opportunities

The dynamic of the world market

Globalization has created a large opportunity to the world nation in variety sector of industry, including dairy industry. Thus globalization, the organization markets have expanded exceed in a country, there is no boundary between countries anymore. The marketers even can market their products to overseas and gain a larger profit margin rather than market locally. It also cause consumers observe their needed products with worldwide. The comparison between products have occurred by the different of consumer needs and different of product features. These phenomena have boost up the development and competitive in all sector, especially dairy industry.

Secondly, the nutrition of dairy product such as calcium, protein, vitamin D and so on are important for a human. The major diet of human without dairy nutrition is impossible in healthy term. According to the data from National Institute of Health, many people, including both children and adult, do not get enough calcium for their body. Lack of absorb in calcium issues unhealthy growth to us. Calcium has improved the growth bones and teeth of human, especially youngsters are growing even babies are during the third pregnancy. Dairy products are the major dietary sources of calcium when compare to others food. Hence, dairy product can be seem as we cannot live without it.

Nowadays, the consumer dietary patterns are changing, it is not similar with previous time. The awareness regarding nutritional value of consumer is increasing. Now, they prefer nutrition food more than normal food. It does not need to mention anymore that dairy product is considered as a nutrition good. Consumers nowadays are willing to purchase toward healthy food even though it is more expensive than normal food. It can clearly be seen, there are the golden opportunity develop in dairy industry market.

The opportunity available Malaysian exporter

The weakening of Malaysia Ringgit or rather the rises of US Dollar against the rest of the world’s currency has brought benefit to Malaysia local economy. A weakness of a country’s currency not only represent a negative growth, it also means bringing the opportunities to economy growth and encourage export activities. While the fundamental of a country is strong and developed, it may attract foreign investors invest to our country for further development. A weakening currency makes product and the cost of the manufacture seem cheaper, this can affect the potential investment occurred. Foreign investors invest in the sector of livestock industry in Malaysia has facilitate the growth in dairy industry.

Furthermore, foreign consumers regard our product values are dropped due to the value of Malaysia Ringgit has fall, so, it is cheaper for them. They prefer purchase Malaysian products because it is more priceless for them. The demand of Malaysian products increase and stimulate Malaysia exportation including dairy products. On the other hand, Malaysian dairy product suppliers hard to import as while with the weakness of the currency, so they also sources from local livestock farmers. It will positive impact Malaysia economy as a cycle system.

Malaysia is a country that rich in natural resources, it is including land, water, mine, petro, and others. The development of dairy industry is easier to engage with this abundant of resources. When Malaysia is rich in land resource, which means it has a good factor to develop in dairy industry. It can raise more cattle to provide more milk to approach the large scale of dairy production. The large scale of dairy production accomplish to satisfy the local demand and for export purpose.

Besides that, Malaysia banking finance is growing rapidly, which has been supported by government policies that promote foreign investment, fund raising, loaning. Banking and insurance are regulated by Bank Negara Malaysia, which issue the Malaysia currency. This kind of financial services contribute a good factor for investor from local and foreign to develop in dairy industry.