British fanciers look to 2021 with their heads held high

AHDB analysts expect total milk production for Great Britain to reach 2020 billion liters in the 2021/12,56 season, an increase of 0,2% compared to the previous season. In calendar year 2021, 12,59 billion liters are expected, which is an increase of 0,5% compared to last year. In the longer term, it is even expected that a decline in livestock numbers can be compensated for by growth in production. A 1% growth in milk supply is expected for the main exporting areas.

A point of uncertainty remains processing capacity, especially when demand from food service channels remains limited. According to analysts, the capacity is currently (with the current lockdown) sufficient to process until approximately mid-April. "Provided that absenteeism due to illness does not increase," is stated as a side note. If the measures are relaxed, the picture will be more positive. Demand from food service is expected to increase, which will also allow processing capacity to be increased.

Good agreements with the European Union
The corona pandemic has significantly disrupted global trade in 2020. Total dairy exports from the United Kingdom were approximately 11% lower and imports of dairy products decreased by 7%. This was partly due to delays at the ports and borders, but also partly due to reduced demand (especially from the food service chain). According to analysts, this will continue to play a role at the beginning of 2021, although a more positive sentiment is seen for the latter part of the year.  

A positive point is the agreement with the European Union. The fact that no quotas or tariffs will be imposed is very good news for British dairy farmers and dairy exporters. After all, a large part of the trade takes place with countries within the European Union. There is some uncertainty about the new paperwork, especially when it comes to cream and skimmed milk concentrate. "These products have a short shelf life, which means there is little time for administrative extras in the export process," analysts say.

The World Trade Organization expects global trade flows to have declined by 2020% in 9,2, with a weak recovery of 2021% expected in 7,2. However, this information may still change. For example, when export problems persist due to limited demand. Also due to the fact that production costs for many agricultural entrepreneurs will increase in 2021 (think of feed, fuel and fertilizer), there will probably be less trade.

Consumer is interested in dairy
In 2020 it became clear that consumers are indeed interested in dairy products. All major dairy categories showed growth in retail sales, both in expenditure and in volumes. Because more people had to cook at home again, sales figures for butter, cream and cheese in particular saw a significant increase. Fresh cream was the fastest growing category, with a volume of 22,8%. Consumers bought fresh cream an average of 14,2 times last year, while that was 2019 times in 12,6.

Butter sales increased last year mainly because more baking was done at home (such as cakes and pies). This concerns a volume growth of 18%. Lunch at home also ensured that the volume growth of cheese in 2020 amounted to 15%. The type of cheese that showed the fastest growth was mozzarella, although cheddar still accounted for just under half of the volume increase. Milk sales grew by 7%, accounting for 65% of profits in total dairy retail. This increase is mainly due to a larger volume per buyer.

Expectations are also good for 2021, although supermarkets will struggle to achieve year-on-year growth. The analysts expect that consumers will also cook more at home in 2021. So became earlier also expected for the United States. Working from home will also become a new standard worldwide, meaning that lunch at home will remain popular. As a result, analysts expect all major dairy categories to continue to see growth in retail volumes compared to 2019, although there will be less panic buying this year.

All in all, the dairy market in 2021 will mainly be influenced by whether or not restaurants and other catering establishments open. And in order to be able to make decisions about this, the global vaccination programs must first bear fruit.