From 2023 to 2027, the average price of 100 kg of milk will be between €45 and €50. Countries that export a lot of dairy are at the top of the range.
During the DSM global ruminant days in Rome, this was said by Christophe Lafougere, the CEO of the strategic consulting and market research firm Gira.
Lafougere said that in the last three years, the dairy market has changed a lot. Costs are going through the roof because concentrations and energy prices are going up. Together, they account for 30% of the total cost. “This means that it’s still expensive to make milk,” says Lafougere.
The EU and New Zealand are making less because the number of farmers and cows is going down quickly. “Not because they want to make more money, but because they want to live a normal life like everyone else,” Lafougere said, citing recent research. “And then, especially the most popular businesses stop running. In France, these people are business owners who are 45 years old or younger and have 1 million kg of milk. Large companies in northern Germany are switching to making bioenergy. And once they are stopped, they don’t start up again.”
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This decrease in production will continue over the next few years because of environmental rules, such as New Zealand’s recent tax on methane emissions.
More milk is made in the United States.
Because margins are getting better, the US will produce more by design. But the total increase in production is not enough to meet the growing demand for butter and powder around the world. “For the first time, big customers like Ferrero say they expect problems with their sourcing,” Gira’s CEO said.
Farmers change who they sell to.
Lafougere said that this is shown in the prices of goods. Even though there are less imports from China, prices are already well above what they have been in the past.
This makes a big difference in milk prices between countries like Italy and France and countries like the Netherlands, Ireland, and Denmark, which export a lot of milk. This year, the price of milk has gone up by more than 60% in the first country and 23% in France. This also causes big changes in how supplies move. Farmers change who they sell to.
Lafougere said, “A-ware bought a lot of milk from suppliers in Milcobel. Then, to keep the new mozzarella factory running, they bought cheaper milk in France.”
