The combination of rising milk productionanda declining market suggests milk prices will come under pressure in the first half of 2023. With production costs expected to remain at elevated levels through the year, milk production could contract if milk prices fall to unprofitable levels. This could serve to slow, or stabilise, the drop in milk prices in the second half of 2023 if demand is not hit too hard. The timing of China’s return to the market will play a big role in when we can expect prices to stabilise. Global dairy processing opportunities and challenges, featuring Philip Vanderpol, Chair (Dairy Processors Association of Canada) and President and Chief Executive Officer (Vitalus Nutrition Inc.); Mike Durkin, President and Chief Executive Officer, (Leprino Foods); Claudio Rodriguez, Executive Director and Chairman of the Board (Gloria Group); Zhanyou Yun, Vice President (Yili Group); and, Heike Steiling, PhD, Head of Nestlé Product Technology Centers Dairy (Nestlé). Global Leaders Forum featuring Piercristiano Brazzale, President (International Dairy Federation); Barbara O’Brien, President and Chief Executive Officer (Dairy Management Inc.); Yohichi Ohnuki, President (Morinaga Milk Industry Co., Ltd.), and Chairman (J-MILK); Miles Hurrell, Chief Executive Officer (Fonterra Cooperative Group Ltd.); Patricia Stroup, Chief Procurement Officer (Nestlé); and, Jayen Mehta, Managing Director (Amul – Gujarat Co-operative Milk Marketing). In the first four months of this year, cuts to milk prices (excluding aligned) have ranged from 3.5ppl and 10.5ppl, with further cuts expected for May, although Freshways have held price for May while Tesco are returning to its cost model, increasing the milk price by 1.0ppl in May.

The industry desperately needs a single standard. This should include emissions and sequestration, so that the true greenhouse gas output of the dairy sector is understood. Global efforts to build dairy demand together featuring Lloyd Day (Inter-American Institute for Cooperation on Agriculture), Ida Berg Hauge (Norwegian Dairy Council) and Ricardo Villavicencio (Canilec). There appears to be very little data on this, but the AHDB is progressing energy benchmarking. Grant aid via the Farm Equipment and Technology Fund in England should be available. Renewables

Energy use

Our latest forecastreleased in September predicted milk flows to slow down in the coming months with a conservative fall of at least 0.5% to be expected. There is scope for production to fall further if prices do not begin to recover this side of Christmas. Recent pressures have exacerbated the trend towards dairy producers leaving the industry with 380 (or -4.8%) of producers leaving the industry between October last year and April 2023. Demand Our current projections for domestic demand expect retail sales of cheese, butter and yoghurt to fall by around 3% in 2023. Liquid milk sales are expected to revert to the long-term trend of a 1% annual decline (see full analysis below). The summit delivered four days of dynamic programming, including eight main sessions and 21 break-out sessions focused on policy, scientific and technical insights and exclusive market analysis. IDF also released the World Dairy Situation Report 2023 , its 2022-23 annual report and announced the winners of its second annual IDF Dairy Innovation Awards, which celebrate and encourage innovative practices across the world. The uplift in production from Sep-22 onwards, and the expectation that yields will remain supported as we move towards the 2023 spring flush, shifted the December forecast for the 2022/23 season from an expectation of further contraction (-0.8%) into growth (+0.7%).

However, family businesses often see this as a price worth paying, providing flexibility and an acceptable lifestyle on what is effectively a 24/7 operation. Legislation

Global and domestic demand remain subdued. Latest Nielsen figures indicate volume falls in butter (-1.0%), cheese (-1.5%) and milk (-1.7%) although less steep than in previous months, whilst yogurt and cream have returned to modest growth (=0.1% and +0.7% respectively (source: Nielsen Homescan, 12 we 9 Sep 23). Friesian Farm, Andersons’ model dairy farm, is used to illustrate trends within the dairy sector for a typical farm. It is not designed to showcase best practice The continued strain on shoppers’ budgets is going to have the biggest impact on behaviours going forward, with the UK predicted to be in recession in 2023 and inflationary pressures are expected to continue. IDF’s collaboration with international standard setting bodies, featuring Jamie Jonker, Chair (Chief Science Officer, National Milk Producers Federation); Raj Rajasekar, Vice Chair (Codex Alimentarius Commission); Paul Mennecier, Chair, (ISO Technical Committee on Food Products); and, Caroline Emond, Director General (International Dairy Federation).

Interestingly, the milk price has increased tenfold since 1973 and is roughly the same in real terms, according to the Bank of England’s inflation calculator, but its value as a percentage of the retail price has reduced from 50% to just 42% today. Much will hinge on cow numbers. The rate of decline in the GB milking herd has been slowing according to BCMS data, only declining by 0.5% in April, or 8,900 head per annum. However, with pressures on margins we may see this accelerating in the Autumn. Unseasonably high grass growth is supporting cow numbers for now but farmers may need to act soon to take advantage of high cull cow prices. Current market signals are for beef prices to fall going forwards. Based on published Agricultural Price index values for compound feedstuffs for cattle, straight fertilisers (nitrogenous) and fuel (for heating)

However, the value of dairy products has been weakening since last autumn, impacting on processors' ability to maintain the elevated milk prices. Added to that, it’s likely processors found it increasingly difficult to pass higher costs into consumer prices in the latter part of the year with demand showing signs of pressure. In 2022, the retail price index rose by 13%, with most of the inflation occurring in the second half of the year. Dairy product prices [3] rose by over 30% in the year, with fresh milk seeing the highest rate of inflation. Labour and working conditions will continue to be a key challenge, to which insufficient value is still attributed by the owners of many dairy businesses.