Spain: Milk prices soar by 25%

Looking at the most recent data published by the National Statistics Institute, both skimmed and whole milk have risen by 20.9% from January to October this year. If October 2021 is taken as a reference, the increase in price reaches 25.3% for whole milk and 25.5% for skimmed milk. What is behind all this?

A lower supply

In addition to the production cost overruns already affecting farmers due to the energy crisis and the invasion of Ukraine, there has been a sharp fall in the number of dairy farms and cattle herds in recent years. Not to mention other structural problems in the sector, such as criticism from primary producers of the degree of compliance with the Food Chain Law, which prohibits the sale of milk below production costs to the industry.

Sources from the farmers' organization Asaja say that the current situation is due to "a generalized lack of supply" which has two axes: a sharp fall in the number of farms since 2015. This organization indicates the disappearance of 7,000 farms dedicated to milk production in the last 7 years. The second axis would affect the number of cows which, in the face of rising production costs, is tempting many farmers to slaughter their older and less productive animals. The price of beef "has reached 6 euros per kilo of carcass meat, when it is normally 3 euros". It is a way for farmers to recover some profitability.

Effects of inflation

Inflation is also taking its toll on milk producers and dairies. According to Luis Calabozo, director of the National Association of Dairy Industries (Fenil), it is estimated that there has been an 80% increase in the price of energy in processing. The milk processing industries are electro-intensive, so energy consumption is a major expense for them. However, most of the expenditure comes from the purchase of raw milk and Mr Calabozo warns of the enormous difficulties that some small companies are experiencing.