European Cheese Industry Thrives Amid Structural Dairy Changes

The European Union's dairy market is experiencing a structural shift, emphasizing efficiency and high-value products. According to the European Commission's Spring 2026 Short-Term Dairy Outlook, raw milk prices in the EU have stabilized after a downward trend that began in October 2025. This stabilization follows an initial price drop due to seasonal oversupply, which has now been counterbalanced by firming commodity prices.

The EU's dairy herd is expected to decline by 0.9% in 2026, reaching a historical low of 18.6 million head. Despite this, total cow milk production is projected to increase slightly by 0.2%, amounting to 158.3 million tonnes. This rise is attributed to a 1.1% increase in individual cow yields, averaging 8,359 kg of milk per cow per year. Factors contributing to this improved efficiency include favorable weather, abundant quality feed, delayed culling, and recovery from disease outbreaks.

The industry is shifting towards high-value products, with cheese emerging as a key product. Cheese production is projected to reach 11.46 million tonnes, rising by 210,000 tonnes compared to 2025. Domestic cheese consumption is also expected to grow to 9.92 million tonnes.

While skimmed milk powder (SMP) production is set to increase to 1,553,100 tonnes, whole milk powder (WMP) production is expected to decline to 466,400 tonnes, reflecting a strategic move away from lower-margin products. The consumption of fresh dairy products is anticipated to decrease to 35.35 million tonnes.

Geopolitical risks pose potential challenges to the sector, as tensions in the Middle East, trade disputes with China, internal regulatory pressures, rural labor shortages, and the delayed EU-Mercosur trade deal loom over the industry's stability. Despite these challenges, the EU's focus on efficiency and high-value dairy products continues to drive the sector forward.