"Corona" for the German cow
A bit of analytics
According to the Central organization for reporting on the German milk market, as of March 12, the seasonal growth of milk supplies to the country has stopped. By the beginning of March, production at German dairy plants was stable (however, compared to the previous year, it increased by 1.7%). The situation on the market of "liquid raw milk" remains uneven: while prices for industrial fats continue to remain at a high level, skim milk concentrate at restrained demand has again fallen slightly in price.
The analytical Agency IFCN reports that 62,813 dairy farms were registered in Germany in 2018. The production of dairy products from 2013 to 2018 showed an annual increase of about 1%, while milk production also increased by 1.8% on average.
According to available data from the Federal food and agriculture Agency of Germany, in 2018, the country produced 4.66 million tons of consumer milk, which is 3.2% less than in 2017. More than half of the total production was for whole milk (2.44 million tons) and about 40% (1.90 million tons) for partially skimmed milk.
Within the country in 2018, a total of about 4.20 million tons of milk was consumed - when calculated per capita, this is about 50.6 kg (compared to last year's figure, analysts record a three-percent decrease). The level of self-sufficiency in milk and dairy products in Germany in the amount of 111.2% has not changed much compared to last year.
As of the beginning of March 2020, Germany produced 6,206 tons of butter, skimmed milk powder -4,561 tons, cheeses (without processed and fresh cheeses) - 26,051 tons.
Is the devil as terrible as they paint him?
To begin with there is a small lyrical digression or a couple of statistical summaries on the topic.
"The coronavirus in Germany". For example, the World health organization (WHO) placed the country on the fifth line in the ranking of States with the largest spread of COVID-19 (in Germany, 18,323 cases of infection have been registered by March 21). We can continue to talk about the unfortunate "corona" and its consequences – there are enough thoughts for a thesis or even a book. In this context, we are interested in a separate "Chapter", and more specifically - the German dairy market.
Perhaps no one will be surprised that in order to avoid the spread of infection, major events are canceled, including for participants in the dairy industry. Thus, the authorities of the Federal state of Baden-Württemberg decided not to hold auctions for the sale of animals organized by the Cattle Union (Rinderunion Baden-Würtemberg (RBW).
At the same time, the European Commission said that farm animals are "essential goods" and their transportation should not be disrupted. But there are already difficulties in communication between the countries: the German publication "Stern" talks about many kilometers of traffic jams on the Polish border. There are also "hostages" of the situation: transported animals. It is said that the police were even searching for local farmers who would be able to manually milk cows locked in transporters. In addition, it is not clear how long the refrigeration units will be able to work in such conditions to save food…
How do the German dairy market players feel? They try not to lose their optimism. Thus, the Director of public relations of the German dairy concern DMK Group, Oliver Bartelt, said that DMK, along with other German milk producers, will do everything possible to "provide the market and fill the shelves of markets with milk" in the current conditions. Taking into account the fact that milk as a product has become one of the leaders in demand, it can be quite difficult to complete the task. And this is despite the fact that with the beginning of the panic in broad circles, there was an opinion about the danger of milk as a "carrier of the virus".
However, the Federal Institute for risk assessment called the transmission of COVID-19 through milk extremely unlikely. The rationale seems more than logical: the new virus, like many others, is sensitive to high temperatures, so heating the product reduces the risk of infection. Summarizing, it is important to add that dairy plants have tightened hygiene rules and try to avoid personal contact of employees to a large extent.
Kerstin Koineke, an analyst at the Agricultural market Information Agency (AMI), believes that price-forming and price-reducing factors that have arisen due to the spread of the virus can lead to a balance in the price of milk. “Corona”, on the one hand, has caused logistical problems in the supply chain on the scale of global trade. This affected, first of all, export-oriented products: milk powder and whey powder, as well as partially butter in blocks. For these categories, prices have declined in recent weeks. On the other hand, the demand for future purchases in food retail stores in the country is growing by leaps and bounds. To replenish the stock on the shelves, retail chains actively order high-demand goods. It is still unclear whether suppliers will be able to use this trend in the long-term contracts.
The possible implications for setting purchase prices are likely to vary regionally depending on the dairy product portfolio. At the same time, in Germany, according to analysts, the price of raw milk may largely stabilize.
It is difficult to state authoritatively how events will develop in connection with the spread of the COVID-19 virus. We can only hope for the best. According to Karin Arzt-Steinbrink, CEO of Upländer Bauernmolkerei, "the dairy industry can and should stay afloat longer than others in difficult times".
Olga Heitmann, special agent for the dairy market in Germany.
Especially for The DairyNews
The Editorial Board's opinion may not coincide with the author's.
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