The dairy processing capacity constraints of lockdown

Tuesday, 28 April 2020

By Chris Gooderham

We have recently quantified the overall change in demand for milk as a result of the Coronavirus lockdown.

The loss of liquid and fresh demand has an immediate impact on milk processing capability in the country. Demand for cheese and shelf-stable products will have an effect on storage capability. However, milk processing during the spring in these factories is normally driven by processing capacity and milk supply, rather than short-term demand. The only additional challenge for processing during the first few weeks after lockdown has been the impact of staff absenteeism.

Combining demand for short-shelf products with processing capacity for shelf-stable products gives us an indication of the overall processing capability of the country.

The lull in demand recorded through retailers in the week after the panic buying caused a significant drop in processing capability. It was this downturn that forced some farmers to dispose of milk. Since this date retail demand has been more stable and this uplift has helped give some respite to the processing shortage.

Up to 11 April milk production was running in line with our pre-Covid milk forecast, although requests for farmers to curb milk production may be having an impact in the latest week (w/e 18 April). Ultimately it will be the response from farmers and the retail demand for liquid and fresh products that will determine whether we have another capacity issue in the weeks to come.

We should also be mindful that the processing capacity in the country relies on all factories running without incident. A site breakdown, particularly if repairs are difficult to source as a result of the lockdown, can significantly reduce our processing capability and lead to an increased risk of excess milk needing to be disposed of.

Listen to our podcast about the effect of Coronavirus on the dairy industry

Chris Gooderham

Head of Market Specialists - Dairy & Livestock

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