Milk. Who will make it?

Do you think you know about dairy production? If so, then please describe to me what a typical dairy farmer looks like today and how far he has to ride his bicycle to find the next telephone. Also, please tell me where Hohhot is and how many cows there are around that place. We (in the western world) probably all will have to change our current notions of a typical dairy region.

Historically, dairy production emerged where pastures were green, consumers were close and the infrastructure allowed a prosperous business and family life. Milk was produced as an integrated, if not essential, part of regional agriculture and food production. The images of a dairy region looked like the New England states or the rolling hills of Ireland. The farms were highly productive. They were family run and traditionally set up to be passed on from generation to generation.

This image changed quickly as the structure of the dairy processing industry changed through mergers and acquisitions. Milk then moved to be bought based on price. Our image of the traditional dairy farm was replaced by the large dairy units that were fi rst built in the western U.S. and Canada. Then came milk production in the desert. It seemed paradoxical, but the overall costs for property, labor, transport and energy were low, and the  young structure of the industry allowed the use of the latest technology and the best available genetics, resulting in very low production costs per pound of milk mainly by achieving very high yields in very large herds.

Despite a decline in farm numbers, national milk production increased. Today, in North America and Western Europe, milk production is stagnant, but dairy farm numbers are declining 5% each year (50% or more in 10 years). National policies supporting the farming sector might slow down this structural change in one country or other, but the large dairy companies, which have now turned into multinational corporations, are still buying on price. The farm gate price for milk is the highest cost component of a dairy product (up to 70% for cheese and yogurt), yet this does not mean we will see super-large and high-yielding farms around the world. This means milk production will grow in regions where farmers have low costs. Currently, this includes South Asia, South America and Eastern Europe.

These regions will not follow the California model of constantly increasing cow performance (milk per cow per day) but, rather, will develop their own growth strategy with their own optimum system. In Southeast Asia, milk production is still increasing as a result of increasing farm numbers. In India and Pakistan, almost all of the milk (96%) is produced in small farms that have fewer than 50 cows. These cows are often milked by hand, and the milk is transported in cans on ox carts. In contrast, this option for growth is already saturated in Eastern Europe, where herd sizes are now rapidly increasing and more modern technologies are applied.

In both cases, yields are still low. In both cases, milk production also is taking an important position and creating a new revenue stream to the region’s agriculture. Where milk production grows, farm suppliers and feed companies follow, offering jobs and building an infrastructure that keeps people in the country. This is one of the reasons China now has the fastest-growing dairy region of the world in the province of Inner Mongolia. Around the capitol city of Hohhot, dairy operations are popping up merrily overnight with feed mills and processing plants. The local university has opened an institute for dairy production and milk hygiene, sending a clear message: Milk is our future. We will make milk.

Read on Feedstuffs Dec 2008