Depending on the world region, the dairy industry has probably not had as many worries since its industrialisation some 150 years ago as it does today. Whereas rising prices and higher costs put pres-sure on virtually every dairy company worldwide, the worries are much bigger in Europe.

The dependence on Russia as an energy supplier has hit EU dairies especially hard. If by chance gas supplies last throughout winter — let’s hope we we don’t have a very cold one—as shortage of energy supplies in spring will hit the industry like a sledge hammer if gas flow from the Russian pipelines continue as they are now. Gas storage at nil and only 20% supply compared to normal will make it a necessity to close down parts or even whole milk and whey processing plants. Looking onto the chain, dairy farmers will need to dispose of their milk in any way they can as once prospering dairy firms will be bankrupt and supply of dairy products to the population will significantly decrease or even stop.

In the meantime, rampant inflation may be further exacerbated and above all prolonged by exces-sively high wage settlements, thus causing all kinds of undesirable reactions in the markets — both export and domestic. Neither is at all surprising of course as restraint on the buyer side when prices are high is not really anything new. Sales of liquid milk and cheese in mid-Europe are already showing signs of decline and sales in plant-based dairy alternatives are no longer growing at high rates.

Even if consumers are not yet fully affected by the energy cost explosion at the moment, except of course for fuel, the buying mood is darkening rapidly. It is to be expected that later in the year and even more so in 2023 there will be much more dramatic changes in dairy sales. In an extreme case, the markets may even return to a surplus situation — despite declining production — if consumers simply have to do with less cheese and milk so that they can still pay their rent and utilities. The signs are also pointing to alarm for the important sales in holiday regions which will be quiet this autumn and next year. Those who have to skimp will probably not be able to afford a holiday, which will cause the tour-ist strongholds once again to begin to fail just as they did two years ago after the Corona lockdowns.

All in all, there are signs indicating a dire imminent future for the dairy industry, thinks Roland Sossna.

International Dairy Magazine, #Sep-Oct 2022