IDM ¦ Editorial
Strategies must be
The new scenario of scarce raw milk supply
The dairy business as a whole is facing a change. Given that milk is in scarce supply almost all over
the world, ‘cheap‘ products are no longer feasible and will not be for the foreseable future. Articles
with traditionally low added value will tend to fall out of the portfolios, all the more so when the corresponding
4 · May/June 2022 ¦ international-dairy.com
production assets fall out of depreciation. The rapidly rising costs should also create room
for more cooperation between dairies, because no one can afford poor capacity utilisation anymore
given the milk price level. Dairy processors and cheese manufacturers also have the choice of whether
they should supply food retailers or opt to produce ingredients for processors on the world market. Of
course, branded companies will not want to give up the market position they have built up over many
years, but they too will have to think about whether selling permanently against the price pressures
from retailers is really a sensible way of doing business.
Milk may well remain available overall, but only if producers are kept in line. This will probably
require new contract models and more transparency and participation in success, even if this puts
pressure on margins. In view of the global shortage of grain etc., many farmers (depending on the
region) have in fact gained the freedom to realign their production. Securing raw materials is now an
absolute top issue of this time, just as important as the question of qualified personnel in the dairies.
Up to now, third-world exports have been the outlet for any surpluses on the raw materials side
in the EU and the US. In the long run, however, there will be no more of this in Europe. Tendentially
declining or stagnating milk production in the main supply regions for the world market will affect
the availability of milk volumes for export. Dutch analyst Erik Eigersma (Strategic Analysis Services)
forecasts a world market demand of 88 million tonnes and a raw material availability of only 59 million
tonnes for the year 2030, a good 15 million tonnes less than at present. How the gap of 30 million
tonnes can be closed is completely open. In fact, the gap could widen further if the Western countries
decide in favour of even more climate protection and significantly less production. In any case, the
losers in this scenario are the regions that are urgently dependent on milk and food imports.
All in all, dairy managers will have to reformulate their strategies or rethink them altogether. Given
the complexity of market parameters and factors influencing the dairy business, not an easy task,
Roland Sossna thinks.
International Dairy Magazine