Milk costs and consumption on the rise

Saudi food and dairy products have always been market leaders in the Gulf in terms of quality and quantity. Saudi dairy producers not only sell their products in the Kingdom but within the entire Gulf region, especially the United Arab Emirates, from their farms and plants in the Eastern and Central Provinces.
Demand for milk is growing in Saudi Arabia at a rate of 6 percent per year. Per capita consumption is 24.6 liters, which is relatively low compared to the global average of 120 liters.
Milk consumption in Saudi Arabia reached a total of 729.4 million liters in 2012 in retail markets, according to dairy experts. UHT, or long-life milk, occupies the lion's share in milk consumption in Saudi Arabia, with a 62 percent share, while fresh milk consumption stands at 38 percent.
Prices are also rising for UHT-treated milk due to a global rise in the cost of powdered milk although prices have remained stable for fresh milk despite an increase in the cost of imported animal feed.
Consumer preference is shifting toward fresh milk. Food and nutrition awareness is spreading among Saudi schools, where dairy-producing companies, especially long-life milk producers, target school children with a variety of flavored milk.
The production cost for UHT-treated milk is increasing for various reasons. Most producers are not able to sustain the production costs associated with switching to flavored milk.
A leading dairy company that dominates UHT-treated milk production is the only exception, as it has a long-term contract from abroad for powder supplies, although the cost of water in Saudi Arabia is causing concern for them.
Al-Eqtisadiah, a sister publication of Arab News, quoted an official as saying that: “Dairy plants are not making any revenue or profit from this product in particular. It is not feasible anymore.”
He added that the price of powdered milk is high internationally, saying, “Most companies are in the process of halting the production of this item.”
The daily also reported that a low supply-and-demand dynamic during the summer months has also contributed to the negative impact.