News digitization
Will the milk price soon no longer be the sole responsibility of the processor?
The dairy farmer supplies his milk to a processor and often only hears afterwards what the milk has yielded. One processor looks at the results to determine the price and the other looks at the expectations of other processors. However, digitization can sometimes change this. Will the milk price soon no longer be the sole responsibility of the processor?
Trendwatcher Ruud Veltenaar argues that digitization leads to democratization. For example, 60% of the energy in a few years' time will be generated by solar panels, the majority of which will be in the hands of citizens. As a result, the energy market is no longer determined by the government and its suppliers, but citizens are taking part as a party.
DNA Passport
The way we look at food is also going to change. "For about $1.000 someone can have a DNA passport made, which makes the technology accessible to a larger group. It is realistic that in a few years the consumer, through blockchain, will compose his menu on the basis of this DNA passport and thus look at what is good for his body."
This means that a new world is opening up for consumers, and they are less dependent on retail. The dairy processors are also seeing these changes and also see that they need to focus more on the internet when selling. The other side of the coin, however, is that livestock farmers will also have more options.
Thomas cartensen, senior vice president of milk and commerce at Arla Foods Amba, says the average dairy farmer faces 75% to 80% fixed costs. It also influences the input costs, but has no control over the milk price. At the same time, they are responsible for 11.200 dairy farmers. In other words: 11.200 companies, all of which (have to be) managed in a different way.
Traditional dairy sector
So far, digitization has largely bypassed the dairy sector. For example, there is a futures market for milk powder and butter that grows every month, but only offers cover for about 3 days in terms of volume from Arla. Rik Loeters of Dairy Auctions Online also points out that trading via the online platform could have been much larger. "There are about 80 companies registered, but only 15 to 20 companies actually do business on it."
The dairy sector and the trade are still quite traditional and therefore prefer the telephone. As in dairy farming, the average age is therefore relatively high. Where the younger generation can no longer do without the internet.
In the meantime, there is definitely a need for a frame of reference or benchmark. "The Global Dairy Trade (GDT) communicates prices that turn out to be different in the field and yet everyone is watching," said Carstensen. This should also come for Europe, something that could be done when more online business is done.
And the futures market?
"Milk powder and butter are settled on the basket of Germany, France and the Netherlands. Questions are especially raised about the French contribution." The starts on August 15 raw milk futures market, but that will be settled on the milk prices of the Milk Market Observatory. It concerns the milk prices of the Netherlands, Ireland, Denmark and Germany. Here too it becomes exciting whether sufficient volumes are traded, but at the same time it gives dairy farmers a grip on the milk price.
In any case, Arla states that it is the responsibility of the cooperative to provide more transparency. This gives dairy farmers the opportunity to do business themselves. Physically selling milk is a difficult story, but hedging and noticing long-term trends can help make dairy farmers less vulnerable.
Herman van den Pol
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