Unpacking the Complex Supply Chain
At first glance, a shortage of powdered milk might seem surprising, given its convenience and long shelf life. However, the finished product is the culmination of a fragile, interconnected global supply chain that is vulnerable to a range of disruptions. The journey from cow to consumer is fraught with potential pitfalls, and a problem in one area can create a ripple effect, leading to shortages on store shelves and in industrial food production.
The Impact of Climate Change on Raw Milk Production
One of the most significant and growing pressures on the dairy industry is climate change. For every 1°C increase in temperature, monthly milk production can drop by 1.72 litres per cow. In areas already prone to heat and humidity, such as Punjab in Pakistan, this effect is amplified. A study found that a combination of high temperature and 10% humidity resulted in a 2.25 litre decrease in monthly milk yield per cow.
- Extreme Weather Events: Droughts and floods directly impact the availability and quality of feed for dairy cows, straining milk production in key agricultural regions. Wet conditions in the UK during 2024, for instance, significantly impacted milk output.
- Heat Stress: Higher temperatures cause heat stress in dairy cows, altering their metabolic processes and decreasing their feed intake, which directly reduces milk supply. Some regions, like Spain, have also seen disease outbreaks, such as Lumpy Skin Disease, further impacting production.
- Water Scarcity: Milk production requires vast amounts of water for feed, animal husbandry, and processing. As droughts become more frequent, water scarcity becomes a major limiting factor, especially in already arid regions.
Geopolitical and Economic Pressures
Beyond the environment, global instability and economic factors play a major role in creating powdered milk shortages.
- Rising Energy and Input Costs: Geopolitical events, such as the Russia-Ukraine conflict, have caused energy prices to skyrocket. Since the process of drying milk is energy-intensive, higher energy costs directly increase production expenses for manufacturers. Other volatile input costs, like fertiliser, add to the financial burden on dairy farmers.
- Volatile Commodity Prices: Supply shocks linked to climate and other factors create price instability in dairy commodities. When key export regions like New Zealand or the EU face disruptions, the global market feels the ripple effects, leading to price fluctuations.
- Government Policies: Protectionist measures, tariffs, and export subsidies can disrupt trade flows, influencing the availability of powdered milk in different countries. Policies aimed at increasing domestic production can also create market imbalances.
Challenges in Production and Logistics
Even when raw milk is available, getting the final product to market presents its own set of hurdles.
- Aging Infrastructure: Some dairy companies, particularly in certain markets, rely on outdated processing facilities. This can lead to inefficient production, increase the risk of contamination, and limit capacity to handle seasonal milk surpluses effectively.
- Logistical Failures: The global dairy supply chain is reliant on efficient logistics. Issues such as fluctuating transportation costs, infrastructure deficits, and maintaining the 'cold chain' for liquid milk transport can lead to waste and delays.
- Shift in Processing Focus: In response to changing market demands, some producers in developed countries are reallocating liquid milk towards more lucrative products like cheese and butter, leaving less volume available for conversion into powdered milk.
Global Demand Exacerbating Supply Issues
While supply challenges are a major driver of shortages, surging global demand for powdered milk also plays a crucial role. This demand is fueled by several factors:
- Population Growth and Urbanization: A rising global population and increased urbanization in developing countries drive higher demand for storable, convenient food products like powdered milk.
- Infant Formula and Nutritional Foods: Powdered milk is a critical ingredient in infant formula and other nutritional products. The growth of the working female population in many regions has boosted demand for convenient feeding options like formula.
- Food and Beverage Industry: The industrial use of powdered milk in confectionery, bakery items, and ready-to-eat foods adds significant pressure to global supply. Its functional properties like emulsification and thickening are highly valued by manufacturers.
Comparison of Shortage Drivers: Supply vs. Demand Factors
| Feature | Supply-Side Factors | Demand-Side Factors |
|---|---|---|
| Primary Drivers | Climate shocks, geopolitical instability, high input costs, infrastructure issues | Population growth, urbanization, rise of infant formula, processed food industry needs |
| Impact on Production | Reduced raw milk yield, inconsistent supply, higher processing costs | Increased consumption, greater industrial use, high export volumes |
| Affected Regions | Major dairy-producing regions like EU, New Zealand, USA, India | High-growth markets like Asia-Pacific, Africa, Middle East |
| Market Effect | Price volatility, production cuts, reduced profit margins | Market imbalance, potential for shortages and higher retail prices |
| Mitigation | Adaptation strategies (cooling tech, resistant breeds), supply chain improvements | Sustainable production, market diversification, innovative formulations |
The Role of Global Events and Consumer Behavior
Global events like pandemics have also played a role. During COVID-19, manufacturers faced raw material and labour shortages, impacting production. Meanwhile, consumer panic buying and a focus on long-shelf-life staples initially spiked demand. While this effect may have subsided, it highlights the fragility of the system to unexpected shocks. A persistent factor is changing consumer preferences. As more people seek convenience and nutritional benefits, fortified and specialty powdered milks become more popular, adding pressure to those specific production lines. The emergence of plant-based alternatives also influences the dairy market, but dairy demand remains robust, particularly in emerging economies.
Conclusion: A Global Balancing Act
In conclusion, there is no single reason why powdered milk is in short supply. Instead, it is a combination of systemic issues that have created a persistent imbalance between supply and demand. The dairy industry is navigating a complex web of challenges, from the existential threat of climate change to the practical realities of high production costs and strained global logistics. For the market to stabilize, significant investment in resilient farming techniques, sustainable processing, and robust supply chain infrastructure will be necessary. As long as these pressures continue, consumers and businesses should expect fluctuations in the availability and price of this essential pantry staple.
For a deeper look into the supply trends affecting the dairy market, you can explore reports from industry sources, such as the Agricultural and Horticultural Development Board (AHDB).
