Automation and robotics have made their way into milking parlors across Europe, Canada, and most recently the U.S. These technologies are helping sustain small and medium sized farms and relieve some labor challenges and costs; but for now, they are not a clear financial home-run for most.
As the dairy industry evolves and modernizes, the processing sector has become increasingly capital intensive. At the same time, high-quality, reliable milk supply, manufacturing expertise, and strong branding and marketing are more important than ever to compete in the global marketplace. By forming joint ventures between producers or cooperatives who can supply the milk, companies with experience in manufacturing dairy products, or companies with greater networking and marketing expertise, each participant can reduce cost and focus on their specialties.
While all exporters will benefit from global demand growth, the EU, with its years of global marketing experience, stands to extend its reach the furthest into these markets. Barring a major shift in the U.S. to a global marketing focus, the EU will seek to capture greater market share.
Unlike other agricultural commodities, the perishability of milk requires that it be processed almost immediately after being produced. Dairy processors are faced with the challenge of handling an ever-growing supply of milk, while anticipating the right product mix to meet consumer demand.
Organic milk has experienced significant growth despite having among the highest price premiums over its conventional (non-organic) counterpart. Milk had the highest sales of any certified organic commodity in 2015 at $1.174 billion and represents about 21 percent of all agricultural organic sales.
A small but growing number of dairy producers are incorporating dairy genomics into their management decisions. Some say this new technology, with its ability to predict the genetic merits of a heifer, has revolutionized the dairy industry. Others have called genomics a game-changer by creating new opportunities for selecting and breeding better cows. Yet others maintain that genomics is not critical to the success of a dairy.
Industry consolidation on both the production and processing side has helped to even out but not eliminate some of the unbalanced market power that had previously been dominant in the industry.
With domestic demand for dairy products likely to remain flat for the foreseeable future, exports will provide the biggest opportunity for U.S. dairy producers over the next several years, especially in Asia, Africa and Latin America.
The latest Veterinary Feed Directive (VFD) Final Rule was issued in June 2015 by the Food and Drug Administration in response to the public perception that the use of antibiotics in animal feed may be leading to antibiotic resistance. The FDA’s new rules will eliminate the use of feed-based antimicrobials for improved growth and feed efficiency if the antimicrobials are considered to be “medically important” for humans.
The current global glut of milk powder, as reflected in the large and growing inventories held in the U.S., the EU, and New Zealand, has kept world milk powder prices depressed, with little hope of a meaningful recovery until at least 2017.
Dairy producers are scrambling. Their industry has always been highly cyclical, but the cyclical swings during the past year have been exceptionally volatile. After surging to a peak last year, the industry has been on a pronounced downswing since late last year.
On April 1, 2015, EU dairy farmers will be allowed to produce as much milk as they wish. But ultimately, it is the EU dairy processors who hold the key to unlocking the vast potential of incremental post-quota milk supplies.
Farmgate prices of nearly two-thirds of the nation’s raw milk are regulated under an administrative system known as Federal Milk Marketing Orders (FMMO). There are ten individual orders, each defined for a specific geographic region.
On March 31, 2015, the EU’s dairy quota system will sunset and its dairy industry will take a giant step toward market liberalization. With March 31, 2015 fast approaching, many EU dairy farmers are gearing up to produce more milk – especially those in the large-scale production countries situated to the north and west which were the most constrained by the EU quota system.
The vast majority of dairy products sold today are easily recognizable products such as beverage milk, cheese, butter, yogurt, etc. However, there is growing interest in dairy products that are not final consumer items.
The U.S. dairy industry has taken to heart the familiar exhortation to do more with less. Over the past 30 years, dairy farmers have expanded total milk production by nearly 150 percent, even as the nation’s dairy herd has shrunk. Milk per cow has grown from 34 pounds per day in 1981 to nearly 60 pounds per day in 2011.
The United States has become a major exporter of dairy products and currently ranks third behind the European Union and New Zealand. In 2011, the U.S. exported about 13 percent of the milk solids it produced. Many products are exported, but the most important ones are milk powders, dried whey products and lactose.