Milk production drops 13 to 20 percent in Western Europe

With the abolished milk quota in 2015, milk production has received a major boost over the past ten years. Denmark, Germany, the Netherlands and Belgium in particular were at the center of growing European milk production, writes dairy analyst Richard Scheper. The expansion of trade agreements, periods of healthy margins and falling interest rates that supported investment also contributed. Dairy farms now face challenges such as reduced profitability, environmental constraints, labor availability, business succession and more extreme weather conditions.

Scherper indicates that the peak in Dutch milk supply is behind us. With looming deadlines for water quality regulations and stronger ammonia reduction targets, milk production development could be even lower than expected, Scheper said. This increases the pressure to, among other things, reduce the dairy herd.

Shrinkage anyway
Two scenarios, a basic scenario and a more pessimistic scenario, are outlined. In the base scenario, milk production in Northwest Europe will decrease by 7,4 million tons (13%), to 50 million tons from 2023 to 2035. This will wipe out almost all production growth from 2010. According to a more pessimistic scenario, milk production will decline by 11,5 million tons (20%) from 2023 to 2035, with the strongest decline between 2025 and 2030. According to Scheper, an essential difference between the two scenarios is the speed of the decline. , where the pressure in the worse scenario is greater for the dairy industry.

Whatever the outcome, in both scenarios Scheper outlines the need for dairy companies to adjust their strategy. Or at least focus on high-quality protein ingredients, branded products and cheese. This is to compensate for additional costs and a reduced export position. The processing capacity will exceed the milk supply, which, according to Scheper, results in less condensed milk and whole milk powder.