Sri Lanka Dairy Market Analysis

Sri Lanka, a vibrant nation in South Asia, is experiencing significant transformation within its dairy industry. While international involvement has furthered development, the industry faces challenges in meeting domestic demand, primarily due to a heavy reliance on imports.

Milk Production and Dairy Cattle

With a cattle population of approximately 1.2 million managed mostly by smallholder farmers, Sri Lanka's annual milk production totals about 450 million liters. Despite this, it falls short of satisfying national demand, making imports a necessity.

Milk Processing and Product Diversification

The country's processing capacity reaches around 300 million liters annually. It produces an array of products such as liquid milk, cheese, and milk powder, supporting both local consumption and exports.

Cheese, Milk Powder, and Whey Production

Annually, Sri Lanka produces approximately 6,000 metric tonnes of cheese, and the production of milk powder and whey each amount to about 80,000 metric tonnes. These products play a crucial role in the nation’s food sector and significantly aid the country’s export economy.

Key Dairy Enterprises

• Pelwatte Dairy Industries
• Milco (Pvt) Ltd.
• Ambewela Products (Pvt) Ltd.

These companies are pivotal within the domestic processing landscape, driving forward product innovation.

Significant Dairy Farms

• Ambewela Farm
• New Zealand Farm
• Polonnaruwa Milk Industries

Export and Import Dynamics

Sri Lanka annually exports approximately 20,000 metric tonnes of dairy products, primarily targeting neighboring markets. Conversely, imports surpass 100,000 metric tonnes, with a significant portion being milk powder from New Zealand and Australia.

Significant Dairy Market Event

A notable event influencing market dynamics is Fonterra's divestment to refocus on its core operations in New Zealand. This strategic shift potentially modifies local supply dynamics and underscores a pressing need for alternative suppliers or enhanced local production capabilities.

Despite Fonterra's market reorientation, initiatives like its Milk Collection & Chilling Centre in Hanwella underline ongoing commitments to bolster local dairy production capabilities.

Conclusion

Sri Lanka's dairy industry stands at a pivotal crossroads as it navigates Fonterra's strategic changes. By enhancing local production and reducing import dependence, stakeholders should pursue strategic partnerships to fortify the industry's resilience in adapting to evolving market dynamics. As Fonterra explores an IPO, Sri Lanka gross profits are expected to rise to $106 million in 2024.

Modified: 2025/04/18

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