Increasing world population a challenge for world milk production
Milk production needs to increase 200 million tons in the next 15 years, from 700 million in 2010 to 900 million by 2025, if we are to meet the demands of the forecasted 7.8 billion people, according to Torsten Hemme from IFCN. But we must not forget that in the past 15 years milk production increased 170 million tons, and 62% of this milk came from Asia.
Torsten Hemme, who presented the 2010 IFCN report at the World Dairy Summit in Parma, said that cost of milk production is rising very fast, especially in the emerging markets and where farmers need to purchase feed. There are farming systems that will come under a lot of pressure. In China for example, there is a high share of purchased feed in the diet, there is very little land base, rocket-rising salaries and a currency which is depreciated. This is a very complex mix of negative factors, which can lead to increased costs of 10-15% unless there is a change of policies.
"We need to monitor these processes to guide processors, farm equipment suppliers but also farmers and policy makers, to know where they are, to navigate in this process" says Torsten Hemme.
Also, the industry needs to reconsider what is the right farming model for the future. Torsten gives the example of India, where they had a very successful dairy farming model: farms with two cows in the backyard, using straw, a crop residual not used anywhere else, as feed, producing milk and growing the industry by 4%.
"This model works perfectly if salaries are 0.20-0.25 dollars per hour. It creates a lot of value. But if the salaries rise to 0.35 or 0.40 dollars, or even to one dollar like in China, the system doesn't work anymore, and there is a need for a new farming system. The new system will probably be larger, with a slightly higher milk yield, professionally managed, with more technology and with another feeding system that would match this new dairy farming model," says Torsten Hemme.
The 2010 IFCN report presents the results from an analysis of dairy regions within a country, whereas previously the analysis were per country. This regional analysis shows that within a country there might be regions that will increase their milk production by 5%, while in another region in the same country there will be a 5% decrease of production, because they are not competitive.
"We need to measure where the competitiveness is, and benchmark with others to see how strongly these drivers I mention earlier push the prices up."
Other findings in the 2010 IFCN report:
Based on monthly data collection in 49 countries milk production in the first 6 months 2011 grew at a high rate of 3%.
Large increases in Asia: India(+2.9), Pakistan (+0.9), China (+0.8) and Iran. Also Brazil (+1.3) and the US (+1) incased their production. (million tons/year)
During more than three years, from November 2006 to November 2009 milk prices were very volatile in a range from 19 to 58 US-$/100 kg milk. Since November 2009 we have seen relatively stable prices on a level of Ø 44.7 US-$ (+/- 8 US-$).
The IFCN network distinguishes two regions based on milk yield: one where cows yield 8000 kg ECM or more per year (Western Europe, North America and Middle East) and low yield regions where the yield is 6000 kg ECm or less per year (Africa, CEEC (Central & Eastern European Countries), South America, Asia and Oceania).
Western Europe, North America and the Middle East had the highest costs.
Costs in CEEC, South America, Asia and Oceania were on a similar level of 30 to 35 US-$ per 100 kg milk.
Compared to the IFCN cost analysis for 2009 in all world regions costs increased greatly in 2010. Western Europe is an exception as costs decreased.
There are indications that low costs are more a result of having the right farming system in terms of feeding system, technology, intensity and management skills than high yield or large farm size.
Feed prices have increased from 13 US-$/100 kg in 2005 to 23 in 2010 (77% increase). In 2011 prices increased even to 33 US-$ (Ø Jan-Sep) or by 43% compared to 2010.
Based on this analysis the average share of feed costs on total costs for all farms is 55% in 2010.
For 2011 it is expected that the average share of feed costs on total costs rise to a level of 65%.
The top 21 dairy processors source 24% of world milk production which is 39% of all milk delivered to processors worldwide.
No. 1 milk processor in the world is Fonterra which processes 3% of the world milk.
Dairy farm numbers in 2010
World average dairy farm size is 3 cows. In developing and transition countries many small scale dairy farms with 1-2 cows exist. On the other hand only 11 of the 90 countries have an average farm size of more than 100 cows. The extremely high differences in farm structures can be shown via the example of comparing the farm structures of the USA with Pakistan. In the USA twice the amount of milk is produced compared to Pakistan, but this is produced in the USA from only less than 1% of the amount of dairy farms Pakistan has.
There are 145 million dairy farms in the world, and teh average is 5-7 people/farm. This means that 0.7 -1 billion people live on dairy farms.
0.3% of the farms and 16% of the cows belong to business farm segment with >100 cows
22% of the farms and 28% of the cows belong to the family farm segment with 10-100 cows
78% of the farms and 56% of the cows belong to the house hold farm segment with 1-10 cows
There are 329 000 farms with > 100 cows in the world.