MILK: WHY PRODUCTION IS NOT GROWING AND WHAT COMPANIES CAN DO

At the beginning of 2023, milk production recorded a slight increase globally, generating a substantial balance between supply and demand. However, given existing conditions we cannot expect an imbalance in favor of production, with a consequent surplus of milk, for at least the whole of the current year: in fact, while production in the EU and the USA is growing, New Zealand is still recording negative rates.

Also, milk prices currently paid to farmers have never been higher, and the margins can also be considered quite unique. However, despite this, significant growth in milk production has not been recorded and is not expected.

The reasons for limited growth are essentially linked to the climate of uncertainty that farmers feel, mainly due to:

– dynamics of energy and raw materials costs for feeding livestock,

– increasingly stringent environmental and animal welfare regulations,

– imminent new cross-compliance rules on European subsidies in agriculture,

– shortage of manpower.

The lack of production growth has a cascading effect on the prices of dairy products, for which a moderate decline is expected for the first months of 2023.

This scenario leads companies to reflect on the strategic choices and actions to be taken to secure the supply chain. How to create stable relationships between producers and farmers? It is essential to create strategic partnerships based on mutual benefits: producers, faced with stability and greater security of milk supply, must put their knowledge and skills at the service of the growth and renewal of farms.