A positive note for the dairy industry was sounded at this year's Semex International Dairy Conference in several different areas, despite the many challenges the industry faces from issues such as an unprofitable liquid sector, volatile prices, veganism, the rise of dairy alternatives and the environment.
Global demand for dairy was growing - even if it wasn't in the UK - and the outlook for prices in 2020 was generally positive, although major price increases wouldn't materialise until after the flush, delegates heard. Although liquid milk sales were falling there was more cheese, butter and powder being exported than ever before, and this was essential to support milk prices by creating alternatives to the competitive domestic retail sector. There was particularly good news from Müller Milk and Ingredients, which had a troubled and transformative year in 2019 with its Project Darwin restructuring:
Liquid market more positive
"2018 and 2019 were turbulent years for the liquid sector due to its unsustainable business losses," said Dr Patrick Müller, CEO of MMI. "Collectively liquid processors lost £144m in 2018, with Müller also being a loss-making business. If Theo Müller (the owner of the company) wasn't so passionate about milk then he'd do something else."
But its Project Darwin turnaround plan sought to address the company's woes. "We told our retailer customers that we would have no loss-making contracts from now on. Over the course of 2019 we have agreed long-term profitable contracts with 90% of our customers, are still negotiating with 6% of them, and have ceased relationships with 4%. Those measures, combined with closing capacity, realigning farm supplies to requirements and simplifying the SKU's, and staying reactive, customer-centric, lean, agile and focussed mean that fixing the core business has been done and the outlook is more positive. Much more positive than a year ago."
Outlook for 2020 positive
Dairy market analyst and journalist Chris Walkland stated that the outlook for 2020 was currently positive on the back of rising markets, albeit slowly rising ones, plus the fact that the UK industry was growing export markets in cheese, butter and SMP. This was essential to ensure the market in the UK wasn't just dependant on UK retailers which "were screwing the liquid and cheese sectors". He was one of several speakers to emphasise the need for exports. Although optimistic for the current market he didn't think milk price increases would come until the flush. UK, EU and New Zealand milk volumes were all unspectacular, so provided UK farmers "didn't go mad through the flush" the outlook for milk price rises later in the year was currently positive. But he slammed DEFRA's official milk price figure in recent weeks, saying that it looked way too high compared to previous years, and was not in line with non-aligned prices.
Government must continue to facilitate post Brexit trade
But there were challenges ahead on trade, as well as opportunities, the conference heard, with both Stuart Roberts, NFU Vice President, and Food and Drink Federation Chief Executive Ian Wright, saying that free and frictionless trade were both essential after Brexit to maintain exports. "If Brexit is about putting the British brand around the world then the UK dairy sector can deliver that," said Stuart Roberts. "But it needs the right investment and trading environment. Top of the list must be ensuring a free and frictionless trade deal with the EU. Alongside this, a future trade policy that doesn't allow imports of dairy products produced to standards that would be illegal to produce here. The alternative is the damaging threat of trading on World Trade Organisation (WTO) rules meaning UK dairy farmers would face higher fees on exports, as much as 48% on butter and 57% of cheddar cheese. With the UK dairy sector exporting 3.2bn litres of products to the EU, it's essential we secure a deal with the EU or face costs in the region of £500m."
Ian Wright reiterated those comments, and said that the industry had to make its case over the next six months to Government, and why exports have to be protected, and that a move in the centre of gravity away from the EU to the US or Asia could be the equivalent of "the operation being a success but the patient still died. It is in our interests that the trading relationship with the EU remains deep and close."
"The industry has to shout to influence trade deals. Make your case as loudly and as consistently as you can on trade. If you don't you will be run over by others."
30% improvement in carbon output on the cards
Although the industry was under pressure on the environmental front with its methane emissions, the industry is poised to cut its greenhouse gas emissions by 30% by the year 2030 on the back of more litres from fewer cows, better genetics, and better feed conversion efficiency that farmers will soon be able to select for, according to Kite's John Allen. "We'll get more from less," he insisted. "More from fewer animals, with less waste." Average yields will increase from around 8,500 litres to 10,500 litres by 2030, from around 8,000 herds in the UK. But dairy cows will be down 500,000 head to 1.34m. The net result will be that volumes are similar to the current 15 billion litres a year, he believed. All in all this performance improvement will cut carbon output by 14%. On top of this genetic selection for Feed Conversion Efficiency will cut GHG's by another 7.5% he stated, with similar gains coming from genetic gains in health and fertility. An improvement in nitrogen utilisation will also reduce them by another 10%.
"There are good reasons to be positive. The drop in ruminant numbers could contribute to global cooling," he suggested.
Dr Jude Capper, livestock sustainability consultant, stated that dairying's GHG calculation could be revised down if new calculations from Oxford University on the Global Warming Potential of dairying is revised, taking into account the fact that methane only stays active in the atmosphere for ten years - much less than carbon dioxide. Under the current GWP100 calculation milk has a GWP of 1.08kgs CO2/kg milk, but under the new methodology it falls to just 0.43kgs CO2/kg.
"It's a huge reduction. It doesn't mean we have solved the problem but it's a heck of a lot better, a potential game changer. But it's not necessarily going to be adopted."
She also addressed the criticism against the industry that "too much land is used for livestock and should be used for other crops".
The fact is that 65% of land in the UK isn't suitable for growing crops for humans. But it is ideal for grazing. "Dairying is not competing with human food for land," she said.
But she admitted dairying may have to look at feeding regimes that utilise more by-products in the future and called for future feed efficiency metrics to consider the competition for human edible feeds too.
No plateau on genetic progress
If dairy farmers think that genetic progress for dairy cows is at risk of plateauing then they can think again. It is on the cusp of an even greater revolution than we have ever seen before, and even faster genetic gains are on the cards, according to Semex's Genomics Program Manager Dr Steven Larmer. That's because the advancement in genetic technology and knowledge, a better understanding of the genome and how genetics affect cow biology, new genetic models, and an expansion in computing power will all combine in a positively transformative way, was his message.
"There will be no plateau on dairy genetics, and there is a huge opportunity to improve dairy cows further if we can really understand what is happening inside the dairy cow and how genetic changes affect its biology. We have only scratched the surface of biological and genetic understanding and new technology and computing power will bring faster gains," he insisted. These gains will be over and above the usual selection and production traits that have been bred for years and will expand into new areas like feed efficiency, rumen bug efficiency, and methane production and associated, correlated traits.
Semex's CEO Paul Larmer agreed with him. "We have had 30 years of extraordinary genetic progress, but there is more to come. We have doubled the genetic gains of sires over the last 10 years and can increase and speed up that rate." For example, the average gain was $16.25/year at the start of the century, and it's $77.57/year now.
But aside from the long-term gains to be had from the rapid adoption of genomic selection there were risks too, he stated. "There will be a race among breeding companies to produce bulls with novel traits to give a competitive advantage," he said. "But we have to bear in mind that industry goals for new technology can be different than societal expectations. Many upcoming choices should be made with the consumer in mind." The dairying landscape was changing rapidly, he said, and the demographics for companies like Semex shifting with fewer clients and more cows per client. "We need to deepen our relationships from transactional to transformational and connect at various levels throughout their organisation."
Communication will be key
Several speakers said that much of the success of the industry will depend on good and simple communication of positive messages to consumers. "We need to build an extraordinary British Farming Brand," said professional communicator Jane Craigie. "Farming is taking a disproportionate amount of blame for GHG's, soil health, wildlife loss, and deforestation. We need a charm offensive," she said. A lot of communication is being done on our behalf, but it's not our message. I think we need our own food brand for our sector because it will differentiate UK food and farming. We need an army of good communicators to help tell our story."
According to Stuart Roberts, the industry was well placed to communicate better with consumers and to get its message across because "people are fascinated about food and farming and love talking to farmers about them", because it was "one of the most photogenic industries there is with beautiful landscapes and animals" and because "everyone now has a smartphone and can help communicate to the public,". Everyone in the sector had a role to play to help farming get its message across, he insisted, and it shouldn't be just down to the NFU and AHDB to do this. "British farmers feel pretty beaten up at the moment, but we have a phenomenal story to tell. But we don't tell it well enough. We have to be way more positive in our communication with consumers to get our message across." Watch more from Stuart here