Worries about the supply chain, labor and inflation will remain in 2022, but the new year is also likely to bring the dairy industry new challenges, according to insiders.
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More challenges await the U.S. dairy industry in 2022, experts say. Capital Press File

“When we look at supply chain, I think the focus will go onto reliability and infrastructure verses congestion,” said Patti Smith, CEO of DairyAmerica, the largest skim milk powder supplier in the world.

The overarching challenge in the dairy supply chain is labor, she said during the latest “Dairy Download” podcast.

“Labor impacts every single other aspect and component of it. … It’s not going away, and it’s not something that’s a quick fix,” she said.

Sara Dorland, managing partner at Ceres Dairy Risk Management, said labor is the thing folks in the industry fret about most.

“I think it’s going to be a challenge for the entire supply chain,” she said.

Mike McCully, owner of the McCully Group supply-chain consulting firm, said he doesn’t know if labor or energy cost is worse for the industry.

Higher energy prices will play into every part of the economy. If there’s more upside in those prices, it’ll affect the cost of everything in the dairy supply chain, he said.

DairyAmerica is keeping a close eye on the reliability of the supply chain and how it can navigate the challenges, Smith said.

Some of the issues relate to how the company can transition its business if need be, such as not being able to get product on a ship or not being able to use a certain port, she said.

But there is also the issue of a tighter global milk supply and the effect on global suppliers, she said.

“We’re watching what the global market is doing and where we can play, what doors are being opened,” she said.

It comes back to reliability and the ability to execute within the supply chain but also which markets might offer opportunities, she said.

“It’s really about being agile and navigating that new world,” she said.

Ceres has been watching China because when that nation begins to consume more dairy products the world snaps to and begins supplying it, Dorland said.

“It creates huge opportunities for U.S. exporters, especially into other areas … where some of the folks that are supplying China may back out of,” she said.

China is also important because when its imports slow, no other region can absorb that change. What happens in China dramatically influences the U.S. domestic market, she said.

Ceres is also watching the weather and the prevailing La Nina, which can have a dramatic effect on New Zealand’s dairy production and a profound impact on milk prices, she said.

The McCully Group has its eye on supply and also how hoarding by food companies over the last several months will play out, McCully said.

It’s also keeping an eye on geopolitical issues, with the collapse of the China Evergrande real estate group, Russian troops on the Ukraine border and the tension between China and Taiwan. Those things could cause a lot of markets to crater, and dairy would be pulled into the vortex, he said.

We have turned the page to a new year. While 2022 has begun, we are still dealing with many of the same challenges that have been with us longer than we care to remember.

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