Virtual Meeting - Impact of COVID-19 on Local and Global Dairy Industries

Fri, 2020-11-20

Report on the Virtual Meeting of the Dairy Science Forum by DSF Chairman Chris Knight
Held on November 4th 2020 by online confertel

For the speaker's presentations please click on their names and for an audio recording of the entire meeting please click here

This year’s November Meeting was very much a first for the Forum. After the disappointment of having to cancel our May Meeting due to the Covid-19 pandemic, there was a general feeling that some sort of meeting should be held, but also a recognition that meeting face-to-face was most unwise. The decision was made to test member’s IT skills to the full by holding a Virtual (online confertel) Meeting. The subject matter was rather obvious: the pandemic was having a global effect far beyond the cancellation of normal day to day activities, and we wished to know more about its impact on the dairy sector. Gathering together at interesting venues, learning, debating and socialising will always be the Forum’s preferred option (“Forum” derives from the name of the meeting place in the centre of the Roman town, but has evolved to include an internet site where messages and discourse can be left, but note that both refer to a place, not an activity). However, for a global topic an online meeting has distinct advantages. Time zones aside, involving speakers from all corners of the globe is easy, and that is what we were able to do.  Four of our eight invited guest participants were from outside the EU (Australia, India, USA and China) whilst our ”home team” represented Germany, Ireland, the Netherlands and Greece. Specialisms included servicing both the producer (with data, feedstuffs, health advice) and  the consumer (including the very young infant), and whilst the focus was on dairy cattle, small dairy ruminants and buffalo also featured.  The presentations are available online, as is an audio recording of the whole meeting.

Torsten Hemme (CEO of the IFCN Dairy Network, Germany) started the meeting by giving a global overview of some key figures, suggesting that the stability in their calculated World Milk Price Indicator that had been seen in the three years prior to Covid had largely been maintained apart from a short initial period of volatility. This had varied considerably between countries that saw a large drop in price (30% in the USA) versus a few that actually saw an increase. Torsten suggested that the future will depend on two things; whether or not a vaccine emerges, and the speed of technological innovation.  The pessimistic view is no vaccine and slow innovation, whereas a vaccine combined with accelerated innovation will ensure growth in the sector. The innovation theme was picked up by Kees Lokhorst of Wageningen University, who pointed out that dairy farms typically do not employ large groups of staff (so Covid has not created significant staffing problems), but do rely quite heavily on external service providers (which have been badly affected by Covid). His group are working to implement more technological approaches to husbandry (so called Precision Livestock Farming, PLF) which will include greater digitalisation and automation introduced through servitisation models (technology put in place and operated remotely by a service provider).

Moving to the other side of the world (Australia) and from the farm to the processor, Chris Sharpe (Manager, Richmond Dairies)  told us that milk production continues to increase with just over a third being exported as value added commodities. This is not without problems: trading relations with China are not good, and shipping has been badly affected by Covid with large numbers of containers sitting idle in ports. In the domestic Australian market there has been a rather familiar switch from food service sector to home retail demand (“latte to bake-off”), exemplified by an 18% increase in demand for butter. The Australian dairy sector has strengths (eg efficiency, export-ready) and weaknesses (eg climate volatility, strong currency) and as far as the future is concerned there are both opportunities (eg the Asian market, strong national and regional branding) and threats (eg high input prices, protectionism). It seemed appropriate that China should be considered next, and Yan Weibin (Executive Chairman of Ausnutria Dairy) was on hand to do that.  Ausnutria are a major manufacturer of infant formulae and have been experiencing considerable growth in recent years. That growth continues, but at a slower pace due to Covid-related problems with marketing, sales and delivery. Raw materials supply and production schedules have not been affected, and measures have been taken to restore sales via an increased online and social media presence. For China as a whole, the dairy sector saw profits decrease considerably as an initial response to Covid, but consumer demand is buoyant and raw milk production has increased.

Across the Atlantic, Wibe Fokkink (dairy commercial director for CSA Animal Nutrition) has been working from home since March and whilst business is good, new working practices have been needed to replace client visits and generate new business. The same service sector/retail repartitioning has been seen in the USA and in some parts of the country there have been localised reductions in milk output. The Federal Government responded to early decreases in sales and milk price by buying 5% of production, and the current situation shows a small increase in both milk production and sales of dairy products. The year has been somewhat of an economic rollercoaster: commodity values fell between January and April but rose between January and October. Milk price has now been maintained or slightly improved overall, but the prediction for 2021 is for decreased demand coupled with increased feed costs. Challenges remain! Globally, India has faced more of an economic challenge from Covid than any other major economy, as explained by Meenesh Shah, Executive Director of the National Dairy Development Board. GDP fell by 26% in the quarter to June resulting in a major reverse migration of urban workers back to rural environments.  Demand for dairy products dropped, but as milk procurement switched from private enterprise to producer cooperatives the milk price was maintained. An initial panic purchase phase was followed by an 11% decrease in liquid milk sales, the bovine and buffalo sectors being affected similarly. Sales of household dairy products such as ghee, butter and paneer increased whilst ice cream fell by 50%, evidence yet again of a service sector to retail shift. The dairy industry is now stabilising again thanks to Government intervention and the prospects are quite good.

Returning to Europe, George Fthenakis (veterinary researcher, University of Thessaly, Greece) was able to update us on the dairy small ruminant sector. A farmer survey had demonstrated that more than a third of producers had experienced a fall in milk price whilst approaching a third had seen feed prices increase.  Feed supply problems were common (50% of respondents) and smaller numbers also experienced difficulties in sourcing equipment. Availability of animals and health consumables were only slightly affected. Interestingly, the majority of farmers (67%) did not change their management routines so presumably the problems were not seen as long-lasting.

Our final guest was John Clarke, Head of Market Research and Insight for Glanbia, Ireland. John switched our attention to the consumer, and was able to show that, whilst the “latte to bake-off” switch had obvious Covid roots, consumption changes of one sort or another have been happening or waiting to happen for some time. Consumer profiles have changed in the last decade, with eating patterns going away from family meals towards snackification and personal consumption. Consumers have become more active, involved and demanding and purchase drivers have changed away from traditional brand dependency to a more mixed scenario embracing outcome-based health/wellness targets and consumer-led branding. As social media has become more pervasive we are entering an era of algorithmic living and a future that will increasingly see consumers as diverse groups with diverse needs. For example, Generation Z (5 to 25 yr olds) are physically active but least likely to read food labels, whilst the baby Boomers (56 to 71 yr old) are focused on healthy ageing and welcome both the functional food and flexitarian concepts. As with all of our speakers, this is just a taster (excuse the pun), please read the presentations!  Be it Covid or consumer needs, our industry has challenges that require responses!