German dairies face energy issues

Many German dairies have been able to adapt to the impending gas shortage and have been able to reduce energy consumption through various measures or make it more flexible to cover energy requirements by using other energy sources (including heating oil), according to the State Association of the Dairy Industry in Lower Saxony (LVN).

Nevertheless, the prices for energy and for many raw materials and supplies are still well above the level before the Ukraine war, underlines the LVN. Disrupted supply chains and the switch to alternative sources of supply ultimately continue to lead to higher procurement costs.

For several weeks it has been apparent that the sharp increase in producer prices for milk and the mild weather conditions have stimulated milk production in Germany. Around 1.6% more milk was delivered in October 2022 than in the same month last year.

Over the months of January to October 2022, the quantity of milk delivered is still 0.2% below the same period in the previous year. In addition to the increase in quantity, milk components (fat and protein) have also increased.

While good demand is reported from the German retail sector due to the public holidays, demand has weakened, particularly in exports and exports to third countries. In gastronomy, too, the demand after the summer boom has dropped to the normal level.

This situation has meanwhile also led to a cooling of the markets for milk and milk products. The prices for milk powder, butter and semi-hard cheese have also declined.

With the current mixed situation, it can be expected that producer prices will gradually weaken in the coming months, notes the LVN. It is also to be expected that the clear spread in the prices for delivery milk will narrow again, it further says.

Due to the persistently high cost factors and the declining dairy cow populations in many EU countries, moderate developments can be expected overall. In addition, the trend towards higher husbandry standards and the increasingly restrictive framework conditions caused by environmental and climate requirements prevent purely quantitative growth in volume, claims the LVN.

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