Dairy crisis during Covid-19 pandemic

Dr. Mohammad Mohi Uddin

The world pandemic Coronavirus (Covid-19) has impacted every sphere of life and life related activities globally. The dairy which supports 1 billion people globally and 16 million people in Bangladesh) has also been affected. The impact of Covid-19 on dairy farmers can be measured by monitoring the milk and feed price which are explained below:

Globally, Looking back to the year 2019 (before the Covid-19 crisis):

Milk production growth at 1.4% was significantly below the long-term average (2.3%) in 2019. This was driven mainly by India, Oceania (New Zealand and Australia), Africa and the Middle East. Meanwhile, the rising popularity of alternative milk in developed countries and lower milk availability in emerging economies slowed down demand growth.Dairy farm economics looked more positive as the world milk price increased by +6% to a level of 31.56 BDT/kg (USD 37.3 / 100 kg in 2019. Still, for many farmers, especially in the US and EU, this milk price is often “too little to live on and too much to die”, to quote Dr Torsten Hemme, CEO of International Farm Comparison Network (IFCN), Germany. The world feed price for 2019 is 18.60 BDT/kg and milk price and feed price ratio is 1.70 (milk price feed price ratio ≥1.5 is considered as profitable dairy)

Bangladesh, Looking back the year 2019 (before the Covid-19 crisis):

Looking at the year of 2019 (before Covid-19 crisis), Bangladesh dairy got shock from the milk quality issues, especially during the 3rd and 4th (Last quarter) of the year which was somehow trying to get back in early in 2020. The Bangladesh feed price for 2019 is 27.17 BDT/kg and milk price and feed price ratio is 1.61 (milk price feed price ratio ≥1.5 is considered as profitable dairy). The Bangladesh milk price is 39% higher than global milk price. The higher milk price is not translated to higher profit for dairy farmers in Bangladesh as the feed price is 46% higher than glob

The way into the crisis – developments until May 2020: Global viewal feed price

The performance of the national farm gate milk price can be used as an indicator for a crisis. The map describes the national milk price trends for 75 countries in May vs. February 2020. It seems that there is no major crisis yet as the milk prices on average declined by 4.6%. Nevertheless, there are two large countries that could be considered as the “epicentre of the dairy crisis”: the US and India, with drops of -29% and -19%, respectively. The poll among the dairy experts revealed that one third considered their country to be only at the beginning of the crisis. But also, two thirds of the participants thought the bottom of the crisis has already been reached. The feed price at global level is decreasing and reached to 16.56 BDT/kg in April 2020 which is 9.1% lower compared with January 2020. This is mainly driven by the low oil price. At global level milk price feed price ratio has increased to 1.93 in April 2020 which was 1.76 in January 2020.

The way into the crisis – developments until April 2020: Bangladesh

The milk price for 2019 was 43.79 BDT/kg which was increased to 45.09 BDT/kg in January 2020 (+3%) but due to Covid-19, the milk price has decreased again in March. The march is the worst in Bangladesh while out of 43 districts, milk price decreased in 37 districts (86% of the analysed districts) ranging from -1 to -44%. The milk price decrease is more pronounced in the highest milk producing regions (Sirajganj and Pabna) and in remote areas than cities (Panchagarh).The milk price was back to normal in April 43.88 BDT/lit which is slightly higher than the average milk price in 2019 (indeed 5.22%higher compared to March) whereas most of the milk is traded in informal channel and the informal market price was 43.85 BDT/lit in March and increased to 47.80 BDT/lit in April (+9.02%)due to strong coordinated approach by the government among dairy farmers, processors, input suppliers and dairy researchers.

In addition, the Ramadan has also affected to boost the demand thus to increase the milk price.The feed price in Bangladesh is increasing even with lower oil price and reached to 29.97 BDT/kg in April 2020 (1.26% higher than March). The milk price feed price ratio is decreased to 1.46 while in January it was 1.59 and compared to March milk price and feed price ratio is increased from 1.41 in March to 1.46 in April

The way out of the crisis – milk price outlook until the end of 2020: Global

The outlook for the world milk price in 2020 remains complex, and future markets and the views of analysts are not aligned. As of early June, dairy future markets expect a fast milk price recovery to reach a level of USD 35 /100 kg milk in July. This can be described as a “V” shape price scenario. The majority of dairy experts at the conference expects a U-shaped recovery and thus a longer period of time until previous price levels will be reached once again.The reason is solid milk supply growth in 2020 so far coupled with a high chance of declining per capita demand as a result of the economic crisis.

The way out of the crisis – milk price outlook until the end of 2020: Bangladesh

Global milk price recovery is “V” shaped and this is also true for Bangladesh as the price recovery was so robust from March to April. However, the future trend for Bangladesh milk price is uncertain as the Covid-19 crisis is just at the beginning. Based on the Integrated Dairy Research Network (IDRN) database, it is expected that Bangladesh milk price might pass “U” shape as there will be general impact on overall food sector, the seasonality, strong monitoring by the Government affiliated organizations to make a stable dairy production and marketing in Bangladesh. The budget and tariff level will also have impact on future farmgate and consumer milk price. To keep smooth running of the dairy farming in Bangladesh, the initiatives taken by the government by announcing the 500 Crore BDT for Agriculture, will also play role in upholding the dairy farmers. The sooner the government does, the better for the dairy sector for Bangladesh.

Further research will be required on dairy stocks and the potential shift of dairy demand in developing countries from informal to formal dairy products, which could have a positive impact on dairy imports. It is quite clear that a real time monitoring of dairy indicators is key activities for providing information upfront for taking preventive measures. IFCN will update its research in the coming months to help people in the dairy world to better navigate in these times at global level. IDRN will continue its effort to update the real time dairy market monitor for Bangladesh.

Data Source: IFCN and IDRN (2020)

Writer: 

Dr. Mohammad Mohi Uddin, Network Coordinator, Integrated Dairy Research Network, IDRN (BAU), and Associate Professor and Head, Department of Animal Nutrition, Bangladesh Agricultural University

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