The Welsh dairy processing sector must capitalise on the current positive market situation to create a more sustainable industry for the future, a newly released report says.
At the end of November 2013 there were 1,874 milk producers in Wales, down 1% on the previous year, while cow numbers increased between 2010 and 2013 by 0.5% to 223,000.
Welsh milk production has averaged almost 1,500 million litres over the last five years. The highest point (1,580 million litres) came in 2011/12, and while poor weather and forage growing conditions resulted in a dip in 2012/13 to 1,527 million litres, the position in Wales during that period was in fact still quite strong.
Currently about 55% (835 million litres) of milk produced on Welsh farms is processed in Wales. This is an increase of 4% on the 2011 report figure.
Volumes of milk exported to England for processing and returned as ‘Welsh’ milk have declined to around 9% (140 million litres). So too have imports of milk to Wales for processing – decreasing from 130 million litres in 2011 to around 40 million litres in 2013 – reflecting a more local/sustainable sourcing pattern.
As a result more than half the total of raw milk (produced and imported) is now processed in Wales.
The vast majority (nearly 90%) of milk processed in Wales is turned into cheese - predominantly cheddar and mozzarella/pizza cheese - and it is estimated that in 2013 Wales produced approximately 88,000t of cheese.
At around 70 million litres, liquid milk is the next largest category followed by products such as yogurt and ice cream. Currently there are 45 “approved” cows’ milk processing establishments in Wales.
The Welsh processing sector has seen significant change in the last three years with the loss of some processors, such as Dairy Crest in Whitland and Saputo, and the emergence and growth of others including Volac at Felinfach and Tomlinsons.
The report identified two “gaps” in the Welsh processing mix – a truly large-scale liquid milk processor and milk powder processing capability.
However, the report concluded that given the distance from consumer markets, milk powder processing could be a more viable option than a very large liquid milk processing plant.
Employment in the processing industry has been relatively steady, and South West Wales (Carmarthenshire, Ceredigion and Pembrokeshire) continues to grow as a key dairy region accounting for 60% (911 million litres) of all milk produced in Wales.
Exports are a key growth area for most Welsh companies, and competition for Welsh milk has increased significantly with most Wales based processors expected to require more milk in the future.
For most dairy businesses, new product development (NPD) was seen as vital, with Welsh Government assistance appreciated by the processing industry.
Commenting on the report Delyth Davies, Head of Dairy Development Wales said, “This study was completed against the backdrop of relatively high international prices for dairy products and, despite tough recent seasons, a reasonably positive farmer base – encouraged by high milk prices and decreasing feed costs.
“The underlying positive environment has no doubt contributed to the optimism of the overall industry. The analysis suggests that overall, recent changes have been positive for the processing industry and that it is more outward looking and confident about its future.”
