A new report published today by Kite Consulting suggests that changes in dairy market dynamics present a major opportunity for UK liquid milk processors to access alternative high value export markets.
The report, entitled Beyond Reset, builds on the analysis Kite conducted in October 2021, in its report Opportunities ahead, which outlined long-term global demand growth for dairy products.
This new report shows that traditionally, world dairy prices have been lower and more volatile than UK milk prices, with higher peaks and deeper troughs. Yet it demonstrates that this has changed in recent years and, since 2019, UK raw milk prices have been behind world raw milk prices, particularly in the liquid sector.
The analysis concludes that this means that UK-produced milk is now competitive as a raw material for selling on the world market – a market that is showing significant demand growth – in a way that it hasn’t been previously.
Accessing global markets
Commenting on the report, John Allen, managing partner, Kite Consulting, said: “Our study shows that UK dairy processors could now make the strategic decision to improve their returns by accessing growing global markets rather than continuing to serve domestic markets that generate comparatively poor returns. This changes the dynamics in the market and creates a ‘new normal’ which, when combined with a liquid milk sector in the UK that has consistently under-delivered on price in recent years compared with other sectors, has the potential to drive structural change across the UK dairy industry.
“With this dynamic in the market, it seems unlikely that liquid milk as a retail loss-leader in the UK will remain viable – if retailers want to secure long-term supply from partners that are committed to fulfilling their decarbonisation objectives, they need to provide a competitive market return. There has got to be a reset, prioritising fresh liquid milk and valuing it accordingly.”
Dr Judith Bryans, chief executive of Dairy UK, commented: “The dairy industry is a modern, dynamic, well-invested industry that evolves fast to take advantage of new markets and opportunities. UK-based processors have a good track record of managing change, innovating their products and investing in their businesses to capitalise on new market opportunities, and I think this will continue at an ever-faster pace now Brexit is behind us.
“The UK is one of the best places in the world to produce milk, with the average carbon footprint being half the global average, and the processing sector constantly improving its environmental capability and sustainability. Liquid milk might be on the decline but the growth in other dairy products, brands and markets is more than compensating, which is ensuring that the industry has a bright, successful and increasingly sustainable future.”