Sector trends

Pandemic boost for domestic cheese sales

Chris Gooderham, head of market specialists (livestock) at our partner specialists, the Agriculture and Horticulture Development Board (AHDB), looks at the opportunities and challenges for the dairy sector.

Most dairy products have followed a general trend in trade with the EU: increasing in the last quarter of 2020 in the run-up to EU exit, then plummeting in January 2021 before starting to increase again gradually. However, by April, trade with the EU remained down for all the main dairy categories apart from milk and cream.

Meanwhile, the picture for cheddar is changing. In the first four months of 2020 and 2021, the UK was a net exporter of cheddar to the EU. Last year, an influx of cheddar in the run-up to Brexit offset this initial surplus. The same influx is not expected this year.

The historic trend shows how our self-sufficiency in cheddar is improving. This is driven by investment in UK cheddar factories to increase capacity, as well as the high level of retail demand compared with ‘out of home’ (OOH).

The impact of the pandemic

Expectations for 2021 were for retail sales to be above 2019 levels, but down on those for 2020. Those expectations haven’t changed, since they were pulled together at the start of the year. For dairy, the shift towards cooking from scratch helped lift sales of butter, cream and cheese, in particular. 

The key benefit to dairy of the coronavirus challenges has been the switch from OOH to retail. Retailers tend to opt for UK-produced dairy products, whereas those operating in the OOH arena are more content to use imported products. Therefore, the switch to retail has also meant a switch to UK produce – the result has been less demand for imported products and reduced exports because we are consuming the dairy stocks domestically.

Feed costs

After a good start, grass growth fell in mid-April due to the cold snap and extended dry period. Growth did recover through May and into June, although the quality fell.

We are also seeing sharp rises in other supply chain costs, such as fuel, plastics and cardboard. All of these inflationary rises will put pressure on supply chain margins over the coming months.

The shift towards cooking from scratch helped lift sales of butter, cream and cheese, in particular


The GB milking herd continues to decline, but the number of youngstock has increased. Our genetic team’s annual survey of straw sales has shown that sexed semen sales have doubled over the past two years. The switch has been driven by improvements in conception rates for sexed semen and the move by some major milk buyers to ban the euthanisation of healthy bull calves on farm.

With rising feed costs and record high prices for deadweight cows, we don’t expect the higher youngstock numbers to lead to an increase in the overall herd size. With environmental restrictions, including widening nitrate vulnerable zones (NVZs) in Wales, it is more likely that older, poor performing cows will be removed, leading to a reduction in the average age of the milking herd.


Our next agri-market outlook is due out at the end of July. For milk production, our expectation is that milk volumes in 2021/22 will exceed last year by around 33m litres (0.3%). That lift is predominantly due to no curbing of milk volumes in spring 2021, unlike spring 2020.

Over the coming three years, we expect milk volumes to continue to rise. Although the size of the milking herd is expected to fall over this period, growth in milk yields of around 2.3% a year will offset this.

The key question is: what will we do with the extra milk? Milk utilisation trends, plus trade balances and consumption habits, can give us an idea of which product groups are growing and which are falling.

The data suggests that, in 10 years’ time, liquid consumption will only account for 38% of the milk produced. Consumption per capita of liquid milk is falling slowly, but it’s being more than offset by a rise in cheese and yogurt consumption. These products are also the ones of which we are net importers, so displacing those imports and satisfying consumers with homegrown product would appear to be an easy win.

Export opportunities will also be key if we are to drive a profitable supply chain. But we will need investment in processing capability if we are to make best use of the extra milk. That investment looks like it should be focused on cheese and yogurt, although we certainly shouldn’t dismiss opportunities to find high-value niche products, such as bespoke milk powders, should they deliver a profitable return.

This article was originally published by our partner specialists at the AHDB. For more dairy insights, visit their website.

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