The global dairy market will offer strong growth prospects in the coming five years, according to a new report from Rabobank.

Yet, the growth will be uneven across the world. Emerging markets in China, India and Southeast Asia are expected to account for more than 80 percent of the market growth volume.

“Tapping into emerging market growth will present a particular challenge for many of the world's dairy processors, most of which are domiciled in, and still focused on, the (European Union) and U.S. markets," said Tim Hunt, global dairy strategist for Rabobank.

It underscores the importance of promoting U.S. dairy exports to countries like China and Japan. For more information on China, click here, and for more on Japan, click here.

Opportunities will also be uneven across product categories. Higher-end whey products are poised for favorable growth, while cheese sales could underperform the broader dairy market.

"The divergence of cheese growth and whey demand represents a major structural shift in the market, and justifies a re-evaluation of ingredient production and sourcing strategies," Hunt says.

Rabobank forecasts that solid market growth, supply constraints and a structural shift in the cost of producing milk will sustain high milk and dairy commodity prices over the medium term. But this won't translate to increased profits for all.

The unprecedented leap in farm-gate milk prices in recent years has caused the position of dairy farmers to generally improve, but less than many outsiders might imagine. And the volatility of profits is far greater, the skill required to manage the business is significantly higher, and the inflation of asset prices, particularly in pasture-based farming regions, ensures that most milk producers still earn a modest return on assets, according to Rabobank.  

"In reality, an era of strong demand and heightened prices for dairy has, and will continue to, bring as many challenges as opportunities for the sector," Hunt says.