The impact of Covid-19 Pandemic on the Dairy Sector

Vetagro Journal Club, #6

The last year and a half has been one of the most difficult times for the whole world. The COVID-19 pandemic has caused more than 178 million cases and nearly 4 million deaths till now. An event of this magnitude had strong repercussions on every aspect of people’s lives, from the private to the working sphere, and on every sector of the market. 

The impact of the pandemic on the dairy sector was highly heterogeneous across different areas of the globe, depending on different trade profiles, resources, per capita income. Anyway, the general picture indicates that the pandemic affects demand, supply, international trade, and labor market. The lockdowns and restrictions changed the consumer habits, with a shift in the consumption from higher- to lower-value dairy products and an increase in the role of online shopping. This, together with the closure of schools, colleges, food outlets, and the hospitality sector, caused an imbalance between supply and demand for dairy products with the consequent price volatility and its general reduction.

The pandemic put the producers in front of multiple challenges: reduced incomes, labor shortage, logistic and transport limitation, the necessity of social distancing and structural intervention to avoid workers’ infection. To face them, producers invested their reduced margin in automation, logistic structure implementation, online sale of the products. The sector moved towards an increased concentration, with bigger farms, more likely to survive the rapid demand shift. The producers who have been able to adapt the offer to the new market needs have suffered less damage than those less flexible. 

In parallel to these changes, governments introduced a series of mechanisms to mitigate the crisis in the livestock sector: the exclusion of the food sector from movement restriction, the support for consumption, the reduction of price versatility, etc. A lot of producers are still “alive” thanks to these aids, but the pandemic caused the exit of many others from the dairy sector, and more are aspected to exit in the medium and long term. 

During this emergency, we have seen an acceleration of the ongoing structural change process in the dairy sector. Hopefully, we are now exiting from the pandemic, but we must learn from it. To survive difficult periods, even not as hard as a pandemic, the only way is to consciously invest for innovation, quality, and efficiency. Animal health, welfare, and requirements fulfillment are the cornerstones of improved production and return on investment. High farm biosecurity level and precise nutrition can boost efficiency, production, milk quality, and income. High technologies can simplify and improve animal management, milk transformation, and workers’ safety. High-level and differentiated logistic services, as well as the opening up to new forms of market and distribution, can give more resilience to the sector. 

The COVID-19 pandemic is for sure a natural disaster and has caused very serious problems at all levels. But any negative event teaches something and can be a starting point for a better future. In the case of the dairy sector, big realities with high-level technologies and differentiated channels both in production, transformation, and sales, have the higher resilience and probability to survive to all the challenges Nature imposes on us. 

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