Iraq: Diary Industry Size and Trends
Between 2019 and 2023, Iraq's dairy industry experienced significant transformations driven by government initiatives, shifting consumer preferences, demographic changes, and external factors. The period saw a surge in demand for healthier and more sustainable dairy products, alongside efforts to modernize the sector, despite persistent challenges.
Iraqi Dairy Industry Size and Structure in 2019-2023
The dairy industry in Iraq decreased at a compound annual growth rate (CAGR) of -3.65%. As a result, it reached 2.51 billion USD in 2023.
The consumption per capita of dairy in Iraq showed an overall decrease in the period 2019-2023. Until 2023, it decreased at a CAGR of -5.76% to reach 31.494 USD per capita.
Broken down by product types, the dairy industry in Iraq was dominated by dry milk. In 2023, the product type accounted for 39.5% of the total value. It was followed by cheese, yogurt and fermented milk, fresh liquid milk, and butter with shares of 23.3%, 17.4%, 17.1%, and 2.8%, respectively.
Imports and Exports of Soft Drinks in Iraq
The imports of dairy to Iraq in the period 2019-2023 decreased at a CAGR of -11.32% to reach 414.97 million USD.
The exports of dairy from Iraq in the period 2019-2023 grew at a CAGR of 18.07% to reach 583 thousand USD.
As a result, the trade balance of dairy in Iraq was negative and recorded an overall decrease during the analyzed period. Until 2023, the trade balance decreased at a CAGR of -11.34% to reach -414.38 million USD.
Key Trends in the Iraqi Diary Industry
Rising Demand for Functional Products
Dairy items such as milk, cheese, and yogurt are integral to Iraqi diets, valued for their high protein and calcium content. Fresh milk remains the largest product category, serving as the foundation for a variety of other dairy products. Meanwhile, fermented dairy items, such as yogurt, gained traction for their probiotic properties that promote digestive health. Traditional beverages like Shaneena continue to hold cultural significance, promoting steady consumption.
In recent years, producers have diversified their offerings to meet evolving consumer preferences. Functional products fortified with probiotics, dietary fibers, and innovative flavors, aligning with growing consumer demand for convenient and nutritious foods. As lifestyles become busier, on-the-go products like drinkable yogurts and cheese snacks emerged as essential additions to the Iraqi dairy industry.
Population Growth Increases Demand
Iraq’s population growth has been a significant driver of dairy industry expansion. Between 2007 and 2022, the population surged by 55%, increasing from 28.7 million to approximately 44.5 million. This demographic shift, combined with rising urbanization and health awareness, fueled increased domestic consumption across all dairy categories. The industry's resilience in meeting these demands underscores its critical role in ensuring food security for a growing nation.
Localism Promotes Self-Sufficiency
In response to global disruptions like the COVID-19 pandemic and the Russia-Ukraine war, a trend toward localism emerged. Iraqi consumers increasingly favor locally-produced dairy products, such as soft cheese, butter, and ghee, valued for their freshness and preservative-free nature. Government initiatives actively support this shift, including efforts to promote food self-sufficiency by restricting imports for select products to bolster domestic production capabilities.
Investments and Infrastructure Modernization
Efforts to modernize Iraq's dairy industry include significant investments in infrastructure and technology. Foreign organizations like the FAO and EU, along with the Iraqi government, provided equipment, training, and financial support to small-scale producers. Notable initiatives include the establishment of village milk centers and the distribution of advanced stainless-steel processing equipment. These projects enhanced production capacity, reduced post-harvest losses, and improved product quality, making locally produced items more competitive.
Restraints in the Iraqi Dairy Industry
Political and Economic Instability
Iraq’s dairy sector is shaped by years of conflict and political turmoil, leading to inefficiencies in governance and production. Frequent policy changes and limited infrastructure further hinder consistent growth. Additionally, Iraq’s reliance on imports – with approximately one-third of dairy products sourced from the Gulf States and Turkey – exacerbates its vulnerability to external market disruptions.
Climate Change and Water Scarcity
Iraq ranks as one of the most vulnerable countries to climate change. Recurrent droughts, extreme heat waves, and reduced water availability severely impact livestock and agricultural production. In southern governorates like Missan, water shortages and high salinity levels led to malnutrition among buffaloes, forcing herders to sell livestock and migrate. These challenges highlight the need for sustainable water and agricultural management practices to ensure the long-term viability of the Iraqi dairy sector.
Infrastructure Deficiencies
Inadequate infrastructure remains a significant barrier to the development of Iraq's dairy industry. The lack of cooling centers and pasteurization facilities compromises milk quality and hygiene standards, leading to substantial post-harvest losses, particularly during Iraq's scorching summers. Traditional processing methods further contribute to these challenges, posing health risks and limiting market reach.
To address these issues, the government and international organizations invested in upgrading infrastructure. Projects to improve cooling chains, transportation, and storage facilities have been pivotal in reducing losses and improving the quality of locally-produced dairy products. For example, the distribution of advanced milk-processing equipment in 2023 enhanced hygiene standards and increased the competitiveness of Iraqi dairy products in local and regional markets.
Global Economic Uncertainty
Geopolitical tensions, the COVID-19 pandemic, and the Russia-Ukraine war disrupted global supply chains, impacting Iraq’s dairy imports and increasing the prices of essential goods. The devaluation of the Iraqi dinar further strained household purchasing power, limiting consumer spending on dairy products. Despite these challenges, efforts to stabilize the currency and promote local production mitigated some of the economic pressures.
Competition from Alternative Dairy Products
The growing popularity of plant-based and lactose-free dairy alternatives presents another challenge. Rising lactose intolerance rates—affecting 93% of Iraq’s population as of 2017—and ethical concerns about animal welfare have driven demand for non-dairy options. Producers responded by diversifying product offerings, introducing alternatives such as almond milk, soy-based beverages, and goat’s milk products to cater to a broader audience.
Forecast for the Dairy Industry in Iraq
Under the base forecast scenario, the Iraqi economy is expected to show steady growth in the medium term. As a result, the Greek air conditioners market is expected to reach 3.08 billion USD by 2029.
If the Iraqi economy does not reach expectations, it will show declining rates in the medium term. In this case, the dairy industry in Iraq will fall to 2.09 million USD by 2029.
If the Iraqi economy exceeds expectations, the dairy industry in Iraq is forecast to reach 3.66 billion USD by 2029.