Friday, March 29, 2024

Claim Europe set to outstrip NZ

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Dairy farmers must get used to milk price swings even worse than this year’s collapse, according to a leading analyst.
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Torsten Hemme, managing director at the International Farm Comparison Network (IFCN) dairy research centre, said farmers could see prices move 50% once or twice every 10 years.

Swings of 20%, close to what British producers faced in 2014-15, could become the new normal and managing that risk was the biggest challenge in the industry.

Hemme said nearly all the world’s milk would be priced at global market values in the long run, with special supermarket contracts the only chance for the UK to be slightly insulated.

He told Kite Consulting’s Progressive Dairy Operators Conference farmers lacked tools to manage that volatility. That was particularly true for larger, higher-input systems that lacked the inbuilt buffer of family labour on smaller farms.

“In most cases all the risk is put on the dairy farmers in the chain – the milk price risk and the feed price risk,” Hemme said. 

“I have to address that to the processors, farm input suppliers and the retailers.

“Right now I don’t see any opportunities like a futures market. We don’t have sufficient liquidity and we have a tremendous lack of knowledge of how to use them.”

Despite the risks, Europe and the UK should be in prime position to tap into growing world demand, Hemme said.

IFCN’s 10-year outlook expected the world to need more than 1200 billion litres of milk by 2024 – 30% more than today.

The demand would come from population growth and per capita dairy consumption rising 14% to 126kg a year.

To meet it would mean more than New Zealand’s annual milk production coming on stream every year.

IFCN predicted the world milk price to average 29p/litre over the next 10 years but farmers would have to cope with feed costs much higher than today’s low levels.

Hemme said the EU could take over from New Zealand as the leading dairy exporter, producing 12% more milk.

The continent had distinct advantages as a dairy region: a temperate climate suited to high-yielding dairy cows, good water availability and a weaker euro against the dollar making production costs more globally competitive.

“We predict probably the costs of a 100-cow dairy in Germany is (now) less than a 500-cow dairy in Wisconsin, just due to currency developments. 

“Overnight, a fantastic opportunity for Europe,” Hemme said.

“The devaluation of the pound was not as strong but, still, it is something.”

 

UK Farmers Weekly

 

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