UK dairy industry enters new global era

The world dairy industry will change beyond recognition in the next five years and businesses will have to keep up, analysts have said.

Speakers at a seminar hosted by trade association Dairy UK said surging milk production this year and weaker UK farmgate prices showed how the global dairy industry was increasingly connected.

Rabobank senior analyst Kevin Bellamy said European dairy producers were now important players in the ups and downs of the international dairy trade.

“The pace of change is getting faster and the UK industry has already entered a new era,” he said.

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“As a result, players will need to continue to adapt to significant changes both at home and abroad.

“Interconnectivity of markets is leading to more complex price discovery, broader impact of market shocks and increased market volatility.”

Milk production for the EU and other six biggest exporting nations rose 6% in the first quarter of this year, with Europe accounting for half of the growth.

Much of that increase ended up traded abroad, as European dairy exports rose 18% on the year in the first four months of 2014.

Benoit Rouyer from the French Dairy Inter-branch Organisation (CNIEL) said adapting to volatile prices was a continual challenge, but his vision of the future was more optimistic than seven or eight years ago.

He noted the gap between average western European and New Zealand milk prices had narrowed in the past five years, shrinking from €7.7/100kg (£6.2) in 2009 to €1.9/100kg (£1.5) in 2013.

Also EU countries have invested heavily in dried milk processing, he said.

Of the €4.8bn (£3.8) committed around the world to build such facilities in 2012 and 2013, €2.3bn (£1.8) was spent in Europe.

“European dairy companies are ready to expand on the growing world market and to satisfy the rising demand of dairy products in emerging countries,” Mr Rouyer said.

“European dairy companies have been rather dynamic in terms of investments over the past few years, while dairy herds are growing again in most European countries.”

The seminar took place before Dairy UK’s annual dinner in Vauxhall, London.

Dairy UK chairman Billy Keane opened the evening by saying there was a “real air of confidence” with the industry, thanks to unrelenting global demand for dairy and major investment in 2014 so far.

Former NFU dairy board chairman Mansel Raymond was awarded the Dairy UK annual award for his contribution to the industry in the past 12 months.