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Renewed Pressure on Spanish Dairy Sector

02 October 2012

SPAIN - Spain's current milk quota gives the sector the capacity to produce around 6.36 million tonnes of dairy products annually. However, due to high costs, actual production is currently struggling to break the 6 million tonnes barrier. This compares to a market demand for dairy products of 9.5 million tonnes. As a result, the market imports more than a third of its annual dairy requirements. This consists of 400,000t of bulk liquid milk (mainly French), 150,000t of powdered milk with the rest consisting of cheeses (mainly German).

This is not surprising as Spain has a lower than average farm gate milk price at less than 30c/litre and probably one of the most expensive production systems with a daily ration cost of €7/cow due to strong reliance on cereal based feeds, which have increased in price by an average of 22 per cent (80 per cent in the case of soya), and represent more than 67 per cent of production costs.

Meanwhile the retail sector is using the milk as a hook to attract consumers. One example of this is “Carrefour Discount”, which is selling a litre of own label milk for 49c.

There are four main reasons for the difficulties in the Spanish dairy sector, namely:

  • Soaring feed prices;
  • Inability to reflect higher production costs in selling prices;
  • Supermarkets’ use of milk as a low-priced product (70 per cent of multiple retail milk sales are PL), and;
  • Competitively priced imports from France and Germany.

Spanish cheese consumption has grown by 2.2 per cent in the last year, (leaving cheese per capita consumption at 8kg/year) with a remarkable increase in the demand for fresh, low fat cheeses, spreadable (with new flavours, offering variety, convenience and an attractive price) and processed cheese (affordable and versatile). Processed cheese has decreased slightly (- one per cent) due to its unhealthy perception, however, the popularity and demand for cheddar continues to grow.

There are also opportunities for enriched and functional products (or for the ingredients to manufacture them) especially in yoghurts, cheeses and shakes destined both for children and elderly people.

TheCattleSite News Desk

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