Global Dairy Market

With the global dairy markets at a low ebb after recent record highs, its highly unwelcome news that the Balkan crisis has led to all EU exports to Russia being prohibited. This has led to another slide in the global GDT auction and a race by dairy companies to replace that volume with price the main lever being used to secure replacement orders. Dark mutterings about the EU price reaching intervention levels have surfaced as milk prices across the continent are cut. Yet, we shouldn’t let recent bad news cloud some really progressive moves within UK dairy in recent months.

Firstly, lets not forget that UK dairy starts from a position of strength in terms of the raw material. So, lets remember the science. Dairy is widely recognized as being a nutritious source of various vitamins and minerals including calcium, protein, vitamin D, B2 and B12. This is ultimately why most health organisations recommend 2-3 servings of dairy a day. Despite this, dairy is often condemned by the media and health lobby for its high saturated fat content and the long held belief of a link with cholesterol, heart attacks and diabetes. However, recent academic research has been questioning these assumptions through showing no link between saturated fat and heart disease in most people. Furthermore, recent research has actually demonstrated a relationship between higher consumption of full fat dairy and reduced levels of belly fat as well as a lower risk of Type 2 diabetes, cardiac events and strokes. With this research coming to light it seems a change in tide could be imminent and the reputation of dairy and therefore total consumer demand should benefit from this.

Secondly, whilst dairy always seem to generate an array of initiatives, frameworks, strategies and leadership plans, in recent months these are becoming more joined up in terms of the organisations behind the plans and in terms of the goals of the plans. When the Defra minister at the time, Jim Paice pledged to spend £5m on collaborative ventures within the industry back in 2012 at the NFU Dairy Summit, the importance of teamwork within the industry seemed to be recognized. With a predicted global population size rising to 9 billion by 2050, there is an excellent export opportunity for the UK dairy industry. However for the UK to compete globally, cooperating actively and transparently across the supply chain will be vital. The Leading the Way growth plan launched last month is a case in point. The plan has been a joint venture between NFU, Dairy UK and DairyCo with the additional support of Defra. The plan details how the predicted 2.5% annual growth in global dairy demand over the next 10 years can help the UK fix dairy its trade deficit by means of increased exports and reduced imports into the UK.

But it is not just the big names in the industry who are being encouraged to cooperate. The RABDF Foundation for Collaboration has received £320,000 worth of support from the government’s £5m Dairy Fund Package with the aim of encouraging farmers to work together to add value to milk and develop a more profitable dairy sector. The conference highlighted how cooperation enables farmers to develop technical knowledge and marketing resources which can help develop new brands and add value. According to NFU president, Meurig Raymond, the industry is finally recognizing that these changes in global demand mean that “farmers have never had a more compelling reason to work together.”

Of course, there is still the paradox of the Voluntary Code that delivers benefit to the industry yet with some significant adverse consequences, but on balance is a step forward. The Dairy UK White Paper and the Dairy 2020 Initiative are other excellent examples of thinking through emphasizing the need for public policy to promote co-responsibility across the supply chain. It also underlines the importance of a shared knowledge structure in generating new ideas and sharing best practice on innovation.

Looking forward, despite the gloomy news form the global markets and Russia, there are signs that while all isn’t sweetness and light in UK dairy, greater co-operation across the industry is starting to lay the foundations of future success.

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