Understanding the present and future of the Spanish dairy sector

These are some of the conclusions of 'The dairy sector in Spain', a study promoted by the financial institution Cajamar, in collaboration with the Inter branch Dairy Organization (InLac),  including articles from 38 experts who agreed on the good prospects expected for the coming years, both in milk prices for farmers and in the evolution of milk consumption.

Following the last report issued in 2016 (the quota system was abolished in March 2015), this new publication addresses the recent evolution of the Spanish daity sector: its production structure and technology, consumption patterns and market dynamics, as well as the environmental standards and constraints that will determine the future of the sector.

Main conclusions of the 2022 report

1. Global and European context:

• Milk and dairy products consumption continues to increase in the world, especially in Asia, responsible for 90% of the increase in consumption between 2008 and 2018.
• This expansion of consumption is expected to continue in the current decade, albeit at a slower pace.
• Since the ending of milk quotas in the EU, milk production has increased moderately, by 5.6% in the period 2015-2020. Half of this increase has been allocated to exports and the other half to domestic consumption.
• The outlook between now and 2030 is for a slowdown in production growth, averaging 0.6% per year, which will translate into better prices for producers.

2. Importance of the dairy sector in Spain:

• Spain is the eighth country in the EU in cow's milk production and second in sheep's and goat's milk.
• Farms, industry and marketing generate a turnover of €13 billion and employ some 100,000 people.
• The dairy sector accounts for 1% of Spain's GDP.

3. Farm structure and dynamics:

• Since 2015, there has been a significant increase in cow's milk production in Spain, at a rate clearly above the EU average.
• The process of farm restructuring will continue (fewer farms but with more production), although with fewer closures.
• Maintenance of regional diversity and production systems, although with a general trend, especially in dairy cattle: larger, more technified and intensive farms, concentrated in specific geographic areas.

4. Expansion and changes in the dairy industry:

• The industry in Spain has absorbed all the increase in domestic milk production, so that in the last decade the volume of milk processed has increased by 1.3 million tons.
• More than half of these increase went to cheese production and rest to yogurts, desserts and industrial products, compared to stabilization in packaged liquid milk.
• Changes in the business structure, with less concentration, thanks to the growth of medium-sized dairy industries.

5. Organization and structuring of the value chain:

• Central role of the Inter branch Organization InLac in the communication among the chain's agents.
• Relevant role of cooperatives, especially in the marketing of milk and the supply of inputs to farms, contributing to the resilience of the chain.
• There is a need to consolidate stable relationships and collaboration strategies between the links in the chain.

6. Consumption, commercialization and markets:

• Strong dominance of large-scale distribution in the retail trade of milk and dairy products, accounting for more than 90% of the total.
  • Moderate growth in dairy products’ consumption in Spain in the period 2015-2020, with very uneven dynamics in the range of products.
  • Reduction of the structural deficit in the trade balance of dairy products in Spain (higher in volume than in value).

7. Technological characterization:

• Farms are incorporating digital tools, although slowly, due to their cost and lack of confidence in the control of new technologies.
• Technological tools are being developed to improve environmental sustainability.
• In the coming years, algorithms will be improved in terms of precision and prediction, which will facilitate the digital transformation of dairy production, both in cattle and sheep. This demands a trained and specialised farmer and workforce.
• High milk quality is demonstrated in all production systems, although different feeding patterns lead to differences in fatty acid and antioxidant composition.

8. Environmental footprint of milk production in Spain:

• The carbon footprint values of milk produced in Spain are lower than global values.
• In the field of animal feed there is a wide range of measures that can be implemented to reduce the environmental footprint.
• Animal breeding and genetics contribute to increasing sustainability in terms of production efficiency.

Additional challenges

During the presentation of the report, the president of InLac stressed that the Spanish dairy sector is facing a new context and regulatory framework. Therefore, as immediate future challenges, the sector has to face the increase in costs (electricity, fuel, feed, labour), as well as the effects of drought and the scarcity of water resources. He also pointed out that "it has to attract talent and encourage generational change to guarantee its continuity".

Some figures of the dairy sector in Spain

• Spain currently has 20,600 farmers producing cow's, sheep's and goat's milk, and more than 1,500 authorised centres for milk collection and processing.
• Spain produces more than 7,000 tons of cow's milk, 508 million tons of sheep's milk and 468 million tonnes of goat's milk.
• Exports rose by 7.52% in volume and 1.98% in value. Imports decreased by 4.87% in volume and 6.32% in value.
• Over the last decade, foreign sales of cheese have grown by 125%. 
• The consumption of milk and dairy products reached 5,000 million litres, with a value of more than €8.6 billion.

The full report in Spanish here: sector-lacteo-espana.pdf (publicacionescajamar.es)

Source: Grupo Cooperativo Cajamar