Dealing with turbulent times at the EDA Annual Convention
The European Dairy Association’s annual convention in Madrid, Spain 24-25 November, focused on how crises and uncertainty are the industry’s daily business
The dairy industry, by virtue of its central place in a large portion of humanity’s lives, is also subject to whatever global and local issues are forthcoming. Giuseppe Ambrosi, the European Dairy Association president, notes the industry through the last decade has faced one crisis after another, with the year 2022 seeing everything from the war in Ukraine to the European Union’s implementation of the farm to fork strategy. “We are dairy realists, so it might get worse, but as dairy optimists we know we can cope with almost any challenge. Turbulent times are our daily dairy business.”
That being said, he noted, “Today we have more than turbulent times. We have the most serious crisis so far, with the impact of the Russian war and the shadow of climate crisis affecting not only our business like never before, but now in Europe and worldwide, we see the issue of food security as part of political agenda, with a 50 per cent food inflation rate in some products.”
Ambrosi said the EU commissioner had been alerted that the EU’s farm to fork strategy would lead to a 10 per cent drop in agricultural output, and to a decline in farmer income, while consumer prices would go up. It will also export agricultural greenhouse gas emissions, and simply move the problem elsewhere. The EDA was worried that the argument didn’t resonate with the EU at the time. “However, things are starting to change in Brussels, and there is now a broader resistance to the ideological approach to farming and agriculture. EDA has been the voice of reason in Brussels’ policy debate. The idea of economics and a stable, affordable food supply has finally gained momentum. We all want to reach climate neutral by 2050 and the only way is dialogue and support of those who can make a change. Dairy is a change maker,” he stressed.
“It’s not about punishing the farmer, all about supporting and incentivising the farmer. We do exactly that. We need to make sure we are part of the solution for achieving climate neutral by 2050 and maybe before. You can count on us to support the Spanish EU presidency with all our force. We all know milk is essential for life. Viva Europe y la latte.”
Ignacio Elola, president of Fenil, observed the spiralling prices of gas and energy has been hitting the sector hard, with the entire value chain suffering the consequences of this difficult situation, and with unprecedented costs of raw materials such as grain. He noted, “On 15 November, the world’s population passed eight billion, which means eight billion people who need sufficient, balanced, sustainable and quality food. Dairy will be a key fixture in supplying this.
“We are committed to Europe, but we need a regulatory approach that addresses the uncertainties,” he added. “We need to protect regional brands that are part of our culture and our countries, as our industry is a driver of change, and this convention proves that.”
Luis Planas, the minister of agriculture, food and fisheries in Spain, stated, “The presence of the dairy sector is fundamental for the farming sector, and for our land, it is a strategic sector in Spain and Europe.” He also noted that the war in Ukraine and climate change, with issues such as abnormally high fertiliser prices are affecting the sector. The EU has allotted €179 million to support the bovine, ovine and goat sectors, and this is set to increase under the new Common Agricultural Policy (CAP) to €321 million per year – an increase of 30 per cent for the sector, with 17 per cent more to the sheep and goat segments.
“It is important to keep on supporting the dairy sector in our promotion actions,” Planas said. “We have to ensure that each link of the chain creates value. I believe dairy is a key sector in Spain, in Europe and the world as well.”
“We at Danone are dairy optimists, and we believe dairy can have a bright future. We believe in the power and goodness of milk, and the need for healthy and natural products,” Danone CEO Antoine de Sant-Afrique told the audience. “Milk is at the heart of what Danone does, and we are convinced there is an exciting future for it. However, you cannot be a dairy optimist without farmers. Farmers are at the very heart of it. It is very clear that without their passion and dedication, there would be no Danone yogurt, no Activia and no Actimel. The role of the farmers is absolutely crucial, by fighting climate change through carbon capture and opening plenty of opportunity.”
That being said, it doesn’t mean we don’t face significant challenges, he warned. “The bad news is the challenges aren’t going to disappear. The first one is the economic challenge since the war in Ukraine. We all know about feed and fertiliser, and its impact on both the short and long terms, as some farmers think there is not a future for their kids. Second, life is made worse for the consumer and people have less money to invest in our products.
“Another crisis is the environment – we are at the forefront. Dairy is being singled out due to the methane impact on global warming and its short-term impact. It is an issue that will stay with us, and a key issue on which our governments and NGOs are calling us to action. Regulations being implemented in the Netherlands, Belgium and Ireland on the environment, are feeding less factual debate on how dairy is not good for climate or health, and there the communications battle is becoming fundamentally defensive. Defensive battles are not won easily.
“They also lead nowhere. Stop being defensive, and start being proud of what dairy can deliver to the consumer and more people – products that are healthy, natural, but facing the challenges. We all need to take ownership of the conversation. We need to turn the challenges we are facing into leadership opportunities and be part of the solution.
“At Danone, we have seen first-hand the natural potential and resilience of a farmer and farming system. We have been working on it since 2016 – it takes money, learning, transformation and technology tailoring, as no two farms are alike. We are building a network of pioneering farmers, with simple principles of technology, such as restoring soil health and biology, working on crops and bringing biodiversity back. We have proven we can reduce greenhouse gas emissions, and are moving towards a 1.5-degree limit. We can do all of that and create a model that is profitable and viable. It is a major opportunity for the dairy industry.
“None of us will succeed alone. Collectively, we have a critical role to play. Working together in the private sector, along with NGOs and governments, and joining forces with other initiatives such as Pathways to Dairy Net Zero, I am confident that we can bring EU to reducing emissions of dairy in a way that maintains economic structure and social fabric of industry and countryside across Europe. The EDA can be absolutely instrumental in setting a new standard for the European industry, and give us back competitive advantage. By taking back the narrative and claiming the goodness of our product, we can tackle the challenges we are facing together. I believe it can be done.”
Mary Ledman, global dairy strategist at agricultural bank Rabobank, explained that its 2030 global dairy outlook looks at where the product is in demand and where it will come from. She noted that China has increased its self-sufficiency by 10 per cent since 2017 to 80 per cent today. “China’s drive is having a ripple effect through our industry,” she observed.
Demand is expected to grow to 120 million metric tonnes by 2030, from its current 85 million. “When we look at who can supply that, it is falling very short,” she stated.
Around 55 per cent of global dairy trade is from the exporting regions where they are not increasing milk supply, with the EU being the “most iffy” number on the chart.
Meanwhile the carbon footprint for milk is not created equal around the globe, Ledman said. “The US is planning to meet its carbon commitments based on research and technology, while the EU is aiming on reducing cow numbers. In the last decade, the EU expanded their market opportunities, while the US looked inward, and ran away from trade agreements. However, now there is a golden opportunity for the US, as the EU has done a lot of heavy lifting on expanding US opportunities.
There are also challenges in emerging markets, she said. “With seven million metric tonnes of demand, Africa is adding people. If the EU cuts milk production to Africa, Africa is forced to produce more milk, and this is not going to lower emissions. Greenhouse gases don’t know borders.”
Ledman noted in the last couple of decades, the world has been fixated on China and its infant formula market. She suggests this may be misdirected, as by 2030, China is going to have 103 million people in the over 50 category. This amounts to one-third of the US population, all of whom need nutrient dense, functional dairy products. “If you look at Mexico, it’s the second largest dairy importer in the world by per capita consumption, and it’s where the over 50 category is also growing. In India, another market leader, the under 20 crowd is declining and they’re getting older. The only place where half of the population growth is going to occur is Africa, where over 80 per cent of the population under 50 years of age. When looking at the dairy of the future, are we producing the products that consumers will want to consume?” she wondered.
José Armando Tellado, the Capsa Food CEO, offered a farmer’s perspective. “We are committed with natural products and the ability of milk as a natural product. Our commitment is the care and respect for the field. We understand that it’s not just what we do, it’s the way that we do them. We are carbon neutral in our factories, and the first dairy company in Spain to be zero waste. We operate a test farm in Asturias for carbon credit certification, measuring and monitoring carbon footprints and technologies.
“One of the main concerns is land loss and whether people be able to eat in 2030. The Spanish population has increased by 17 per cent since 2000, due to immigration to 47 million. In that time, there has been a drop in farms from 60,000 to 10,000.
“However, production has grown, farmers are more professional, but we still need to take into consideration the issue that 40 per cent of farms are in areas of fewer than 2,000 people. Meanwhile, the average age is increasing for farmers and more farms don’t have enough financial capacity to fix this situation. Around 60 per cent will retire before 2030.
We are just worried about guaranteeing we have food, so we need to invest in the value chain, to make sense for all of us, and not leave anybody behind,” he stated.
Peter Giørtz-Carlsen, EVP Europe and member of the executive board, Arla Foods, rounded off the first session with his discussion of his company, which processes 30 billion kg of milk per year. Arla asks its farmers about 250 questions about climate yearly, as “it’s clear we have a huge role in providing healthy and nutritional dairy to the growing population, and are obsessed by being part of the solution on the climate journey.”
The company sees growth of around two per cent per year with Asia, MEA and EU as the main growth drivers. In Europe, there is growing demand for dairy and a huge need for high quality protein with low emissions, despite negative stories. “Consumers across the world recognise the importance of dairy, but recent volatility has put pressure on the whole industry,” he stated.
In the EU, the slow delivery of its Farm to Fork scheme, along with the issue with the consumer labelling, is further undermining confidence in the industry, Giørtz-Carlsen opined. Although there are strong headwinds economically, he stated that dairy processors have to think about critical challenges to create a sustainable food system. “Dairy will play a significant role, and we need to produce 50 per cent more by 2050. This year has shown the global food system is vulnerable to external shocks,” he observed.
Arla is increasingly focusing on managing the climate improvements into commercial opportunities, as otherwise, there will not be money coming back in to spend on the farm. “We should take a more proactive step and try and show the way forward. Arla is earmarking up to €500 million per year to incentivise sustainability activities on farm and we are putting farmers at heart of sustainability journey,” Giørtz-Carlsen said.
“It’s not only up to the authorities – it’s up to us. We need to be ambitious on the climate, show the way, and create a better understanding.”
In session two, Piercristiano Brazzale, the IDF president, spoke about the challenges facing dairy, including the shortage of supplies, costs, and inflation, as well as the pressure on livestock production to be more sustainable, food policies on sugar, fat and salt; front of pack labelling protecting the use of dairy terms, superior nutritional value of dairy products, position paper, growing of products in the market of codex labels, confirmation of a starting of a process of protection of dairy terms. “There is a need for greater recognition of livestock in sustainable systems. Animal and plant foods should not be thought of as competitive systems, but as complementary products,” he observed. “Dairy farming is one of the only sectors that has the opportunity for carbon sequestration as well as carbon emissions.”
Global milk production
Catherine Roux, GM of Lactalis southern Europe, one of the largest dairy processors globally, offered the opinion: “We believe dairy has a bright future, because we need to feed a growing population. Our dairy products are really cheap in terms of nutrition, and offer nutrients such as 56 per cent of a person’s calcium daily intake in a serving. This is naturally bioavailable, and not added, and so it is easily absorbed by the body. One has to eat a lot of cauliflower or almonds to meet the same levels.”
When looking at plant-based products, Roux observed, “They are here, and they will grow, but we are first and foremost committed to dairy. We do not oppose plant based, but we should be clear that we are superior to plant based. We have to be clear to our consumer, have to promote dairy, and not be defensive, when facing plant-based factions.”
Vicente Gómez Cobo, president of Femeleche in Mexico, gave an overview of the Mexican industry. He noted it is a large, diverse country with very different climates, some population growth, and a very rural population that is moving to urban areas, as well as 800 different cheeses. It is also a population that migrates north. Bank revenues into Mexico in the form of remittances from the US amount to billions. “Mexicans milk cows in the US, and then, when they come back, they buy cows and milk them,” Cobo said.
There are thousands of milk producers, and everyone’s interested in Mexican dairy, he noted. “However, we don’t need more milk, we need more capital. Companies are now looking for domestic milk. Milk and dairy has grown 12 per cent in value, but consumption has remained stable,” he said.
Charles Brand, EVP processing solutions & equipment, Tetra Pak wrapped up by noting, “Food systems today are unbalanced and complex. At COP27, food was the centre of the event. The dairy industry was very well represented. There is now global recognition that food is part of the challenge, but also part of the solution. Lot still to do to transition to sustainable, resilient food systems, but Tetra Pak agreed to support Pathways to Net Zero for dairy processing technologies. Food systems account for one third of GHG emissions, while one-third of food is lost. By 2050, we need 60 per cent more food to feed 10 billion people, without using more land and while lowering emissions.
The dairy sector is at a crossroads, with 20 per cent of milk produced lost or wasted currently. “We see the challenges as opportunities for the dairy sector. It is a win-win for people, the planet and common business to help the dairy industry decarbonise. Innovative technologies can get there by optimising production, by using a circular approach to dairy production,” he stated.
Packaging plays a critical role in the food supply chain, Brand noted. “Around 74 per cent of milk sold in Europe is packaged in beverage cartons, and 50 per cent in Europe goes for recycling. We are aligned with EU’s objective, but believe it should recognise the role of packaging for perishable food and its contribution to reducing food waste.”