The European Commission has forecast that EU milk deliveries could grow by more than 1% in 2016 (above 2 million tonnes).

It says this is due to a strong increase in the first four months of the year (+5.5%), to be followed by a slowdown, likely to lead in the second half of the year to a milk collection below last year.

Data in the first quarter compares with a period of time last year when several Member States reduced milk collection to limit surplus levies because the quota system was still in place until April 1.

By contrast, the Commission says some downward supply adjustments are currently taking place. In addition, as every year, it says weather will play a major role.

milk production eu

Milk Price Reductions

The Commission says milk price reductions since the beginning of the year, together with a rise in feed prices notably for soymeal, squeezed farmers’ margins further.

While for several months, many farmers kept their cows and continued producing to maintain revenues (and pay back loans), some farmers have now started culling more cows.

The Commission says there are other factors also playing a role, e.g. in France operators apply various supply management means such as A/B/C3 price systems, penalties if deliveries go beyond contracted volumes, incentives to reduce milk deliveries… The differentiated pricing (A/B) system applies also in several English and Spanish companies.

Milk collection

Available data shows a decrease in milk collection compared to last year in France, the UK, Spain, Portugal, Slovakia, Denmark and Ireland.

In other, Member States, the Netherlands, Poland and Italy, the increase compared to last year slows down, but remains strong.

In the Netherlands, farmers try to increase production as long as they can, given that by the 1st of January 2017 they will need to comply with the soon-to-be voted legislation restricting phosphates emissions. In Hungary, Luxembourg and Estonia, milk collection continues steadily increasing compared to last year