Whey in high demand as dairy market growth set to continue
It was once the by-product of cheese. But the increasing value of milk fractions such as protein and lactose have turned whey into one of the most sought after outputs of the dairy industry.
This trend looks set to continue, with strong growth forecasts for high-end, whey-based products, compared to very modest expectations for cheese sales.
Rabobank's latest global dairy outlook report says that future growth in dairy markets will be the envy of the food world. However, it cautions that the growth will be unevenly spread, both in terms of regions and product categories.
The basis for the optimistic forecasts for the dairy sector are based on continuing growth in demand for dairy in regions such as southeast Asia, China and India. While local production of milk in these areas is rising, it will be unable to match demand and will fuel continued reliance on imported product.
The good news for Irish producers and processors is that scope for further expansion among our low-cost competitors in New Zealand, Australia and Argentina is limited. According to Rabobank, this will mean that a significant share of the global demand will have to come from higher cost regions. As a result, the report concludes that global dairy prices will need to remain at levels high enough to encourage farmers to invest in higher cost regions. It also notes that input costs such as feed, energy and fertiliser look set to remain high for the foreseeable future. Based on this rationale, the authors predict that prices for whole-milk powder (WMP) would hold somewhere between €2,515-2,895. "An efficient co-op selling WMP on world markets and stripping out only the costs of manufacturing and transport would be able to pay an average milk price of 27.4-32.8c/l," it concludes.
The report says that while margins have improved in recent years at farm level, it is nothing close to the size of the increase in milk prices.
"The costs of feed, fertilisers and oil have exploded in recent years, while the costs of compliance have continued to mount," it says. "This cost inflation has well outstripped productivity gains, pushing up the cost of producing each litre of milk."