NEW YORK — Challenging conditions may lead to more acquisition activity in the dairy sector, said Rabobank in a recent report.

With weak economies and supply constraints restricting sales over the past 18 months, mergers and acquisitions offer a potential solution for profitability. Though underlying growth is expected to pick up in coming years, many markets won’t see the rapid growth rates posted prior to 2008. Companies adept at adding new business will be well positioned to sustain growth, Rabobank said.

“The catch is that the number of attractive targets is shrinking and multiples have risen,” said Tim Hunt, an analyst for Rabobank. “With billion dollar value deals harder to come by, dairy giants will need to acquire or tie up with more companies than in the past to sustain the same rates of growth.”

In 2013, 124 dairy deals occurred, up from 111 in 2012 and the highest since 2007, Rabobank said.

Recent acquisitions bolstered Montreal-based Saputo, which climbed up a spot to eighth place on this year’s list of the top global dairy companies.

“Once again, giants Nestle, Danone and Lactalis top the list, showing that the world’s largest dairy companies are reasonably entrenched,” Mr. Hunt said. “We continue to see some companies outperform their peers in sheer growth terms. In particular, the Chinese giants Yili and Mengniu, which saw their sales expand by 14% and 20% respectively, with Yili entering the top 10 for the first time ever.”

Dairy companies are eying the expanding Chinese market for strategic positioning, with several recent joint ventures that include a partnership agreement between Kansas City-based Dairy Farmers of America and Inner Mongolia Yili Industrial Group, and a joint venture between Paris-based Danone and China’s COFCO and China Mengniu Dairy Co. Earlier this year, the WhiteWave Foods Co., Brooklyn, N.Y, announced a joint venture with Mengniu to make and sell a range of nutritious products in China, and another joint venture is pending between The Netherlands-based FrieslandCampina and China Huishan Dairy Holdings to produce and sell infant milk formula in China.