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With the rise in milk prices the year 2024 will look better for most dairy farmers than the year 2023 - Torsten Hemme, IFCN

World 20.05.2024
Source: The DairyNews
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Torsten Hemme, the founder of the IFCN analytical network, became one of the main speakers at the Dairy Olympics-2024, which will take place from May 26 to 30 in Ankara, Turkey. As the CEO of the IFCN Dairy Network, Torsten Hemme has supported people in the dairy world to make the most informed decisions. However, last year he decided to transfer the company's shares to a new owner and took over the role as a Chairman of the IFCN Advisory Board. In an interview with The DairyNews, we spoke with the expert about the reasons for this decision. Additionally, the IFCN founder shared his expert opinion on the current situation in the global dairy industry and what market players can expect in the future.
With the rise in milk prices the year 2024 will look better for most dairy farmers than the year 2023 - Torsten Hemme, IFCN
Can you please introduce yourself and your role in the dairy world?
- With an educational background in agricultural economics, I have been the Founder and CEO of the IFCN Dairy Network, supporting people in the dairy world for over 30 years to make better decisions. In June 2023, I have handed over the management of the IFCN to Lukasz Wyrzykowski who has been with IFCN more than 10 years. Moreover, we decided in the IFCN board that ABagri is for the future of IFCN the best fitting shareholder. For me as an entrepreneur it was always important to build a sustainable company and to organise the succession to the next generation well. I am proud that I could realise both with IFCN and like to thank all people who have supporter these two steps.

After this step in 2023 what is your role today?
- After the very active IFCN career I am happy to serve in the dairy world in three roles:
a) Educational role in dairy economics/sustainability for new dairy talents,
b) Supporting role for dairy related organisations like IFCN and others,
c) Dairy farming role where I have intensified my activities and investments.

What do you think the dairy industry will be like by 2024? Could you tell us about the market prospects?
- The world market price for milk that IFCN uses has stabilized in 2024 at approximately 40-43 US$/100 kg of milk which indicates that we are coming out of the price cycle which started in the year 2022. That time we saw record milk prices of 64 US$/100 kg milk followed by price lows of 36 US$ in 2023. So we are now in the third year of the price cycle where milk prices are rising. This is also supported by the dairy futures (EU &US) which indicate a further increase of towards a price level of 50 US$/ 100 kg milk by end 2024. This would mean a price increase of ca. 20% to the level now.

What does this mean for dairy farmers in a country like Kazakhstan?
- The milk prices that dairy farmers receive in Kazakhstan tend to follow the IFCN world milk price indicator, albeit with a certain delay. This is especially the case in the price cycle time 2022- 2024. In the year 2022 Kazakhstan milk prices remained stable in US$ and the rise started in the year 2023 reaching 50 US$/ 100 kg milk. This was a delay to the world market of ca. 12 month. I would expect for Kazakhstan in 2024 a decline of milk price in US$ to reach a kind of alignment with the world market price.

What do you think about the possibility of introducing artificial intelligence on farms?
In January 2024, the IFCN hosted a conference where it analyzed 224 dairy farm tech companies.

Those companies have so far invested over 1 billion US$ in new technologies for dairy farming and the related supply chain. So far it is not clear what technology will become the new standard for dairy farmers. Overall I expect that these companies can help the dairy farmers around the world to much better manage their farm and their cows.

How will the farm economy be shaped in the future?
For the countries which follow with national prices the world market prices for milk and feed we can sum up the following:
  • 2022: This was a record year in terms of dairy farm profitability
  • 2023: This was a bad year with lower milk prices, high feed prices, rising costs driven by inflation
  • 2024: In the first quarter we saw average level milk prices still high costs driven by inflation but also lowering prices for feed and fertilizer. I assume this quarter was overall more bad than good for the farmers. With the rise in milk prices the year 2024 will look better for most dairy farmers than the year 2023.
What role does government support play in farm development today?
Myself and also IFCN is a not telling governments what to do. These decisions are done by the political process in each country. Overall we are happy to help policy makers to better understand the impacts of their policies on dairy farming and how they can better reach their political goals.

Looking to government policies we see two types: a) supporting policies like farmers support programs; trade policies, tax policies, etc. or b) policies that are none supportive / hindering farmers in their developments. It is interesting to see that a number of countries do actually both.

What are the prospects for cow's milk? Will the current situations in the world significantly affect?
Lets get first the figures right. The milk from cows and buffalos count for 95% of the milk which is produced. The remaining 5% are from goats, sheep, camel, yak, horse, etc. The demand for dairy products from cow/buffalo milk is growing at a speed of 2 – 2,5 % per year. This means we need to produce additionally each year the milk volume of New Zealand to match this demand growth.

The dairy demand growth has basically two drivers: No.1 is more people on the planet and no. 2 is the dairy demand per capita. The population growth is more or less stable with ca. 80 million more people each year. The demand per capita is driven by the income of people and their preferences. So far we have not seen a major change in the trend on dairy demand per capita.

What do you think about the trendy plant-based drinks replacing milk in Europe?
The share of milk alterative is small but has shown strong % growth in the past. What is now interesting is that this growth has slowed down in Europe and the USA as the products are much more expensive than dairy products and the people face higher costs of living driven by inflation.
One additional point is interesting: Once you look on Oatly a market leader in “oat drinks” and Beyond meat a market leader in vegan burgers you find:
a) NO PROFITS: So far they never made a profit and are economically not sustainable without capital injections from the outside
b) – 95% IN SHARE PRICES: Share price of both companies dropped by 95% in the last 3 years which means investors lost 95% of their money.

What are your expectations of The Dairy Olympics 2024 in Ankara?
I have attended a number of the Dairy Olympics conferences in Turkey, Israel, Russia, etc. In all cases I experienced a great organisation team, great presentations and great people from the dairy industry. I expect the same 2024 in Turkey and also to extend my knowledge base on dairy. May be I join the sports activities this time as well.

What are you going to talk about in your presentation at the event?
My presentation on 27 of Mai will be about the global dairy trends, drivers and perspectives.

The Dairy Olympics will take place from May 26th to May 30th in Ankara, Türkiye. The aim of the Dairy Olympics is to assess the prospects of the global dairy market, evaluate existing industry issues, forecast trends, establish new connections, and initiate new ambitious projects.