Fonterra is signalling a full-year loss of up to $675 million for 2018-19.
Hemme addressed dairy farmers from around the world at the Alltech ONE18 Conference held in Lexington, Kentucky, last week.
“In the next ten years we will need 26% more milk. It will be demanded and will be produced. Most of this milk will be produced in emerging countries,” he says.
“Dairy farm numbers and structure will change radically. Fasten your seat belts, we might underestimate speed.”
NZ/Australia has the largest average size of dairy farms in the world with 364 cows. North American farms average 180 cows, while the average in South East Asia is 1.9 cows. Cost of milk production around the world differs by a factor of 10.
IFCN data shows the milk world production growth rate in 2016 was the lowest since 1997, caused by poor prices and poor weather, but it is increasing again.
Hemme says it is unclear whether the increased production will come from an increase in cow numbers or higher yields.
He says technology will accelerate structural change and the IFCN has begun benchmarking the impact of new technology on farm.
He also warned that the industry depends on the trust and preference of consumers on dairy.
“If this industry continues at 2.3% demand growth a year, we will all have a relatively comfortable future.”
However, he says volatility will always be part of the industry as “we live in a complex and fast changing dairy world”.
Disruption could be caused by many factors, including “not getting sustainability right and not getting millennials on board”.
Dairy consultant Jack Rodenburg, Dairy Logix, says farmers who lead in labour efficiency will lead in the future. This will lead to larger farms.
“Economies of scale result mostly from scale of mechanisation,” he says.
• Alltech paid for Stephen Cooke to visit California as part of the Alltech Dairy Tour, which coincides with the annual One Conference.