EU Dairy Sector Faces Up to 20% Production Drop Amid Environmental Pressures
Source: The DairyNews
EU dairy processors are being alerted to a potential significant decline in milk volumes, with reductions up to 20% anticipated, according to Rabobank's latest research.
Dairy analyst Richard Scheper emphasizes the importance of proactive measures as the industry faces a combination of challenges including environmental regulations, labor shortages, and extreme weather conditions.
Northwestern Europe, historically a powerhouse in EU milk production, is experiencing a structural downturn in output. This region, which includes Denmark, Germany, the Netherlands, and Belgium, has enjoyed robust growth fueled by the elimination of milk quotas in 2015, trade expansions, and favorable economic conditions. However, these nations now face pressing environmental deadlines that demand a substantial reduction in dairy herd sizes and a shift towards less intensive farming practices.
Rabobank's analysis predicts a gradual decrease in northwestern European milk production by approximately 7.4 million metric tons, or 13%, by 2035, essentially reversing the gains made since 2010. A more severe scenario could see a reduction of 11.5 million metric tons, or 20%, especially if stricter environmental targets are enforced amidst weak profit margins.
This anticipated decline in milk production will compel dairy companies to adjust their strategies significantly. There will likely be a shift towards higher value-added products such as specialty proteins, branded consumer goods, and cheeses. These changes aim to offset rising farmgate and manufacturing costs and mitigate the loss of export competitiveness.
Moreover, excess processing capacity may lead to reduced production of condensed milk and whole milk powder. Dairy cooperatives will face additional financial challenges, as reduced milk intake could result in capital withdrawal by members. To address these challenges and manage inefficient transport costs, there is an expected increase in local milk collection and processing investments, particularly in regions like Eastern Europe, Ireland, the Baltic states, and Spain.
Scheper argues that beyond immediate responses, consistent policy support is crucial for enabling a smooth transition to more sustainable farming practices. This includes reducing emissions and providing certainty about future regulations. He warns that delays in policy-making could exacerbate the situation, making it increasingly difficult for the industry to adapt effectively.
In an interview with the Farming Independent, Scheper noted that while the potential loss of the Nitrates Derogation could impact Ireland, its effects would be comparatively less severe than in the Netherlands due to the existing flexibility in the agricultural sector. He anticipates that if Ireland were to face stricter regulations, it could still manage the impact more effectively than its European counterparts.
Northwestern Europe, historically a powerhouse in EU milk production, is experiencing a structural downturn in output. This region, which includes Denmark, Germany, the Netherlands, and Belgium, has enjoyed robust growth fueled by the elimination of milk quotas in 2015, trade expansions, and favorable economic conditions. However, these nations now face pressing environmental deadlines that demand a substantial reduction in dairy herd sizes and a shift towards less intensive farming practices.
Rabobank's analysis predicts a gradual decrease in northwestern European milk production by approximately 7.4 million metric tons, or 13%, by 2035, essentially reversing the gains made since 2010. A more severe scenario could see a reduction of 11.5 million metric tons, or 20%, especially if stricter environmental targets are enforced amidst weak profit margins.
This anticipated decline in milk production will compel dairy companies to adjust their strategies significantly. There will likely be a shift towards higher value-added products such as specialty proteins, branded consumer goods, and cheeses. These changes aim to offset rising farmgate and manufacturing costs and mitigate the loss of export competitiveness.
Moreover, excess processing capacity may lead to reduced production of condensed milk and whole milk powder. Dairy cooperatives will face additional financial challenges, as reduced milk intake could result in capital withdrawal by members. To address these challenges and manage inefficient transport costs, there is an expected increase in local milk collection and processing investments, particularly in regions like Eastern Europe, Ireland, the Baltic states, and Spain.
Scheper argues that beyond immediate responses, consistent policy support is crucial for enabling a smooth transition to more sustainable farming practices. This includes reducing emissions and providing certainty about future regulations. He warns that delays in policy-making could exacerbate the situation, making it increasingly difficult for the industry to adapt effectively.
In an interview with the Farming Independent, Scheper noted that while the potential loss of the Nitrates Derogation could impact Ireland, its effects would be comparatively less severe than in the Netherlands due to the existing flexibility in the agricultural sector. He anticipates that if Ireland were to face stricter regulations, it could still manage the impact more effectively than its European counterparts.
