USDA says European Milk Production is Declining due to Environmental Constraints

According to a report from the US Department of Agriculture's Foreign Agricultural Service published on the Global Agricultural Information Network, environmental limitations from the European Union (EU) are causing the region's milk output to stagnate.

The production of milk in the region (except the UK) reached a peak in 2020 and has since been falling as a result of fewer cows being kept since many farmers are giving up dairy farming rather than making the necessary investments to comply with the new regulations.

According to the report, cheese production in the EU27 (the bloc's countries) is expected to rise in 2022, at the expense of butter, non-fat dry milk, and whole milk powder. According to the report, cow milk production in 2022 will be 144.6 million MT (MMT), a decrease of 434,000 MT from 2021 and 836,000 MT from 2020.

Furthermore, EU dairy industry experts anticipate a further decline in EU milk production beginning in 2023, when the new Common Agricultural Policy (CAP) and accompanying Farm to Fork Strategy (F2F) conditions require EU dairy farmers to adjust their production systems take effect.

In 2020, milk production in the EU increased by 1.6 percent over 2019, with the biggest increases being in Belgium, Ireland, Italy, Poland, and Spain. According to the report, China has recently become the dominant export destination for EU milk, accounting for half of EU liquid milk exports or about 0.5 percent of EU production.

The EU27 cheese production for 2022 is expected to be 10.6 MMT, up 50,000 MT from 2021 and nearly 240,000 MT higher than production in 2020. This is due to the fact that cheese production is prioritized over other dairy commodities and is preferred by EU27 milk factory use.

The USDA expects this trend to continue, as several new cheese plants have emerged in recent years, primarily to produce industrial mozzarella for the food processing industry, but at a slower pace because the decrease in milk deliveries means that other products suffer.

Germany, Ireland, France, the Netherlands, Italy, and Denmark are the main EU cheese exporting Member States (MS), accounting for nearly 43 percent of China's imports in 2021. According to the report, domestic cheese consumption in the EU27 increased in 2020 and 2021, but the increase in value in 2020 is expected to slow due to supply constraints driving up prices.

The EU butter market is growing slowly and may begin to contract in 2022, as an ageing population seeks healthier eating habits and there is a lack of milk deliveries. According to the report, butter production decreased by 2% in 2021 compared to 2020 and is expected to decrease slightly further in 2022, while EU27 butter exports for 2022 are expected to decrease further in response to price increases, following a 16% decrease in 2021 compared to 2020.

Butter consumption in the EU27 is expected to fall slightly in 2022 compared to 2021, which was higher than in 2020. The EU27 2022 Non-Fat Dry Milk (NFDM) production is expected to fall further after a 4% drop in 2021 compared to 2020 due to a decrease in butter production.

More than half of EU NFDM production is exported, while consumption is expected to fall further in 2022, following a drop in consumption in 2021 due to limited production and rising prices. The USDA predicts another drop in Whole Milk Powder (WMP) in 2022, following a 10% drop in 2021 compared to 2020.