Increasing pressures from national and EU environmental policies could lead to some declines in EU dairy production, according to the latest EU Agricultural Outlook 2023-2035.
Sustainability drivers will continue to shape EU milk production in the next years, with high quality standards and organics expected to generate more added value in the sector.
Expectations for stricter EU and national environmental policies will likely force the EU dairy herd to shrink by 13% by 2035 compared with the 2021-2023 average.
EU milk production is now at a “turning point” and is headed towards increasing sustainability, according to the report published by the European Commission.
EU dairy production
Yield growth is expected to reach only half the growth rate seen in the past decade, and EU milk production could decline by 0.2% per year on average between now and 2035.
The underlying drivers of growth in milk yields in the past, including the productivity gap between EU countries, are gradually becoming less impactful, the report states.
While growth in global milk production will increase at a similar rate as in the last decade at 1.6% per year, future increases in production will likely be driven by regions other than the EU.
Southeast Asia and north Africa are expected to increase their milk production by around 3 % per year by 2035. The EU is expected to keep its export volumes stable despite declining production.
Dairy prices are likely set to follow an increasing path after they have decreased rapidly in the first half of 2023 following the historical high of 2021/2022, the report states.
The EU raw milk price is expected to remain well above pre-2022 levels by 2035. However, this will largely be due to inflation and the price development in real terms will likely remain rather flat.
Trade
Prices for EU cheese, which will likely remain the EU’s flagship export product, are expected to rise the most while EU butter and skim milk powder (SMP) prices could also significantly increase.
The increase in milk production in main importer regions will slow down import growth for both skimmed and whole milk powders, according to the latest outlook.
By contrast, the cheese and whey production streams are expected to grow by around 2.3 million tonnes of milk equivalent and could absorb 36% of the EU milk pool by 2035.
SPM could achieve a limited growth at 2.3 % by 2035 compared with the 2021-2023 period, and butter production could remain stable, the report states.