Editorial ¦ IDM
Sustainably different?
January/February 2022 ¦ international-dairy.com · 3
The dairy market in 2022
The dairy market started into the year 2022 under different circumstances than in the past decades.
Prices for dairy products are at historic highs for the beginning of the year. Revenues from the
combination of butter and skimmed milk powder are higher than ever before, passing the 50-cent
mark. Historically high prices are also being achieved for new contracts with cheese and whole milk
powder.
The European and global market has meanwhile returned to an equilibrium situation after several
years of oversupply with protein and is currently even showing signs of a slight undersupply. Since
the middle of 2021, the export volume of the main "milk countries" as a whole has deviated from
the long-term rising trend and is decreasing slightly – a situation that was rarely observed in previous
years and always only in the short term. The reasons for the current decline are manifold. In Germany
and other EU countries, the stricter environmental and production regulations, which lead to higher
costs and reduced yields, play an important role. Currently, there are also high costs for concentrated
feed, energy and fertiliser. In the US, high costs combined with relatively low milk prices are dampening
production. In Oceania, the weather has been unfavourable since the beginning of the current
season. Meanwhile, global demand for dairy products continued to grow slightly despite the negative
economic impact of the Corona pandemic.
Higher prices for dairy products will push milk prices, while the full force of "milk inflation" is far from
being fully felt by consumers due to long-term contracts with food retailers.
In the past, higher prices have always stimulated milk production quickly and allowed it to grow beyond
demand, triggering price declines again. That this cycle will also be set in motion in the current
year seems more than doubtful given the framework conditions.
There may be windfall gains in the form of cows being milked a little longer and slaughtered later.
A spirit of optimism among milk producers like at the end of the quota system with increased investments
and restocking is not to be expected, not only because of the long approval procedures and
high construction costs for stables. The challenges have become diverse and complex. More sustainability
is at the top of the agenda. In its Green Deal, the EU Commission has set ambitious targets
for the reduction of mineral fertilisers, pesticides and antibiotics. These are measures that will reduce
yields in the future – just like the intended increase of the market share of organic products.
In many countries, animal welfare is a strong focus in food retailing and politics, which is likely to
further strengthen the ongoing structural change. As far as financing is concerned, an increase in
VAT on animal products is now even being discussed in Germany. This would make dairy products
even more expensive for consumers than they are due to the strong cost increases faced by dairies
and milk producers, which have by no means been fully passed on yet.
More sustainability will ultimately increase competition – on the one hand for the raw material milk
and on the other hand for the euro in household budget.
Monika Wohlfarth
ZMB, Berlin
/www.spxflow.com
/international-dairy.com
