Bluetongue Virus Challenges the European Dairy Market

Key takeaways:

• The bluetongue virus is spreading in Europe, impacting dairy production and potentially raising prices
• Vaccination faces efficacy challenges, especially in infected herds
• Despite the virus, labor shortages remain the biggest challenge for dairy farmers

In a recent episode of Dairy Insights: Heard Mentality, a StoneX podcast that covers the dairy markets and key drivers, Director of Dairy Market Insight Nate Donnay discussed the bluetongue virus which has been affecting milk production. He interviewed Florian Hildebrand, Business Development Agriculture & Foods Vice President of the Frankfurt Dairy group, to get his insights on the impacts of the disease across Europe.

The virus, transmitted by biting insects endemic to subtropical regions, has spread throughout Europe, affecting countries including the Netherlands, Belgium, Germany, and France. While not highly fatal to dairy cows, Hildebrand explained that it can dramatically reduce milk production and poses a higher mortality risk for other ruminants like sheep and goats.

Germany’s Outbreak and Effects on Production

Hildebrand described how Germany’s outbreak has escalated rapidly. By July/August 2024, cases surged to 3,500, affecting all federal states, particularly in the north and northwest. Hildebrand even suggests that the unofficial count may be much higher, as some farmers avoid reporting to authorities.

The impact on milk production has been severe, with farmers reporting milk yield drops of 3%-8% on affected farms, with some unable to return to previous production levels. The virus can also cause earlier calving and shorter gestation periods which negatively affects calf development and thus results in lower milk production.

Hildebrand believes that it is difficult to determine the long-term consequences for the industry. Heavily affected farms may face growth limitations, and some might cease production due to the high cost of replacing dairy cows. Plants cannot operate at full capacity because milk collections are going down by around 10% in some instances.

Vaccination Challenges

Vaccinations present their own set of challenges, according to Hildebrand. While available in Germany, it takes a month for the vaccine to become effective in a dairy cow. In heavily affected regions, vaccination is not recommended due to the potential for ineffectiveness and a potentially fatal reaction for the cow.

Market Impact and Price Dynamics

Hildebrand believes that the virus could have a bullish effect on the market. He notes that many market participants currently do not even have the virus on their agenda. With around 45,000 dairy farms in Germany, the bluetongue virus could have a substantial effect on prices, even if it doesn’t affect every farm.

The Biggest Limiting Factor: Labor

He also points out that, despite its presence throughout Northern Europe, the bluetongue virus is not currently the biggest limiting factor for farmers. Labor shortages have been the most significant challenge for the past year, making it difficult to maintain operations at full capacity. To combat this shortage, some farms are investing in automatic milking systems and technology to increase production with fewer workers. While these investments are expensive, they could have a positive long-term effect on milk production and farm efficiency.

US + Europe Dairy Market: Future Outlook

Despite all these obstacles, current margins for US and European farmers are favorable. However, a combination of factors is making it increasingly difficult to improve milk production, including: bluetongue in Europe; bird flu in the US; a lack of replacement animals in both regions and government policies hindering supply.

To watch the full episode of “Bluetongue in Europe” on Spotify, click here.

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