Optimism and issues - an interesting year for dairy

By Jim Cornall contact

- Last updated on GMT

Trade deals such as the impending Brexit, and NAFTA renegotiations were among the economic issues affecting dairy in 2017.
Trade deals such as the impending Brexit, and NAFTA renegotiations were among the economic issues affecting dairy in 2017.

Related tags: Milk, Us

Farmgate prices went up a bit in 2017, although not as much as farmers hoped, and value-added products continued to dominate companies’ strategy to get more money from raw milk.

DairyReporter has created a timeline of some of the most notable stories of 2017, which can be seen below.

As always, acquisitions continued, with the major ones being the completion of Danone’s takeover of plant-based US company WhiteWave and, much later in the year, Canadian company Saputo taking over troubled Australian company Murray Goulburn.

Earlier in the year, trouble had also hit another Australian company, infant formula makers Bellamy’s had major issues that seem to have subsided.

Formula was rarely out the news, as Chinese authorities’ new rules led to concern over the ability to export, however, again this seems to have been smoothed over as manufacturers continue to gain approval.

Brexit not the only economic issue

In Europe, manufacturers are still in the dark over what will happen in a post-Brexit economic climate. Concerns are high in Ireland, which has enjoyed a long relationship with the UK in terms of trade, and with cooperatives such as Arla, which has many UK dairy farms among its farmer members.

But it’s not just a post-Brexit Europe that is of concern, trade talks and agreements around the world are being renegotiated or torn up as the US continues its America First policy, leading to its neighbors having serious concerns over NAFTA negotiations.

Volatility in the markets also shows no sign of abating – hardly surprising in an industry that can be so adversely affected by weather and currency fluctuations.

Product development

While prices increased at the beginning of 2017, and there was some cautious optimism, the GDT, which saw large gains around the beginning of the year, has seen levels stabilize rather than take off. This has been reflected in the price farmers are being paid for milk – while there were steady, small increases in the first half of 2017, there has been no long term recovery to 2013 levels.

And this in spite of the rising price of butter, although fears that 2017 would be remembered as the global butter-free Christmas seem to have been, thankfully, wide of the mark.

The year also saw other conflicts and concerns, with the US tackling Canada over its dairy policies, disagreements over European PDO goods – mostly cheeses – and a continuing spat worldwide over dairy alternatives being able to use (or not) dairy terms for products.

These are all issues that look certain to run into 2018, and possibly beyond.  It suggests that the volatility the dairy industry has experienced may well continue well into the foreseeable future.

Positive outlook

Companies are doing their best to head off issues, through acquisitions, creating innovative products, getting more value-added products from their milk, and, for many reducing costs still further in an effort to balance the books and create profit.

Towards the end of the year, adding to those concerns, was an article on GRAIN’s report that dairy producers are creating a lot of greenhouse gases. While some companies denied the results were accurate, clearly sustainability will continue to be an important factor in how dairy companies, both large and small, continue to manage their businesses.

And this, also, comes at a financial cost.

All in all, 2017 has been a challenge, and simply flipping over a calendar picture to reveal 2018 isn’t going to change much.

Innovation

There are still many challenges, however, this enables companies to adopt a leaner approach, incorporate more innovation, and jump onto continued scientific research pointing to the benefits of dairy.

There is definitely room for optimism as can be seen with many of the big stories featured in DairyReporter over the past 12 months. Acquisitions continue, new products are being created, companies and cooperatives are investing in new plants, and in R&D to continue innovation.

If a corner was indeed turned earlier in 2017, increased awareness of those challenges, as well as strong plans to innovate and improve sustainability, means that while the road ahead is still bumpy, companies are moving forward and finding ways to make dairy more profitable.

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