I had occasion to speak recently at the ICOS annual conference on the future of dairying. In preparing for that talk I came across a very interesting paper dealing with four mega trends that, according to the authors, are likely to impact on dairy. Read more here.
The trends discussed were: the emerging importance of the Global South (developing countries), in both the consumption and production of dairy products; an associated intensification in the production and processing of milk; the looming importance of sustainability along the value chain; and the threat of potentially “disruptive” technology in the processing of milk.
Most of this discussion on the Global South tends to be about demand.
What has attracted much less attention though is the competitive threat from milk producers and processors in the Global South. By 2030, it’s projected that the growth of milk production in the Global North (developed countries) will be less than 6.5%, whereas in the Global South, growth could exceed 30%.
The emergence of significant milk production growth in the Global South is likely to be associated with a substantial increase in intensification. It’s simply frightening to learn about the number of 10,000-cow dairy units that are now being established in China.
The Chinese, because of their planned system, have an ability to mobilise resources that is unrivalled.
It’s no surprise, for instance, that two Chinese processing companies have climbed the international rankings for financial turnover. I would suggest that surely animal welfare is an Achilles heel for these units.
Maximise profits
The study of agricultural economics used to be simpler: maximise profits subject to prevailing technology.
That continues to be the dominant challenge but for several years now policy has laid down additional conditionalities in respect of output and input choices, especially concerning environmental factors.
Policy interventions increase production costs and thereby reduce the environmental footprint. But it’s also critical that the costs of compliance are absolutely minimised.
Farmers naturally resist the imposition of additional costs.
And there are frequently good reasons for this resistance that may include scientific and equity objections.
Policymakers often get things wrong. But I take the view that once legislation is in place, resistance can also be costly, in terms of the energy expended and the false hope that may imply that policy can be overturned.
I personally think it’s far better to get on with the impositions and try to implement them at least cost – but at the same time prepare the ground for future policy change.
The recently published updated Teagasc Marginal Abatement Cost Curve (MACC) underlines the challenge to achieve a 25% reduction in greenhouse gases (GHGs) by 2030.
There are a few lessons that clearly jump out of that analysis. Firstly, no single action is going to work. Teagasc identifies 16 separate responses that are required of farmers over the next seven years.
Secondly, the highest possible uptake of these actions is crucial to the 25% target being achieved. An enhanced uptake will of course require Government intervention.
Thirdly, if the highest uptake isn’t achieved, then animal numbers will have to adjust and this will also require Government intervention.
Technological change has rescued us throughout history in times of crisis. I’m convinced that, faced with today’s challenges, a similar outcome will prevail.
The long-run evolution of milk yield shows the US as the standout performer in terms of the absolute increase in yields over the last 60 years. But in percentage terms, Ireland’s performance is equally impressive.
And our achievement is all the more impressive (ahead of New Zealand) when you factor in that it is off a pasture base and not due to the massive additional use of concentrate feed, as it has been in the US and the UK.
I think the possibility of lab-based milk products can’t be simply dismissed as fanciful
Technological change has, of course, been equally impressive in dairy processing. Milk continues to enthral us with the functional possibilities of its constituents.
It’s highly likely that we’ll continue to develop more and more value creation into the future. And many of these future products haven’t even been conceived yet.
But the processing sector is also likely to be challenged by potentially “disruptive” technologies. The one that’s on everyone’s minds is precision fermentation. This technology holds out the prospect that milk products can be generated without cows. Some commentators predict that these products could be a real threat within 10 to 15 years.
Lab scale
There’s no doubt that the technology has been mastered at lab scale but cost and scalability seem to be a bit far off yet and this timeline may be unduly optimistic.
But I think the possibility of lab-based milk products can’t be simply dismissed as fanciful. Just like plant-based “juices”, the motivations for consumers shifting to them will be driven by adverse perceptions concerning, environment, animal welfare, human health and nutrition.
If the prognostications concerning precision fermentation are realised, I don’t envisage these products completely wiping out conventional dairy products.
Some consumers, and we hope sufficiently large numbers of them, will maintain a preference for conventional products as long as these have high environmental, human health and animal welfare credentials.
Naturally I’m biased, but products that are produced by family farms employing pasture systems are best placed to capture these consumers.
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