Luxembourg Dairy Sector Faces Challenges After Lactalis Exits Long-term Partnership

The Luxembourg dairy industry is experiencing significant disruption following the announcement by French dairy giant Lactalis that it will not renew its milk collection agreement with the Prolek cooperative after April 2027. This decision marks the conclusion of a partnership that has lasted over four decades and impacts nearly 70 dairy producers who are now seeking alternative buyers for their milk.

Prolek, which represents 68 family-operated dairy farms producing approximately 50 million litres of milk annually, accounts for an estimated 10% to 15% of Luxembourg’s total milk production. In response to Lactalis's decision, Prolek has commenced discussions with major dairy processors such as Luxlait, Muh-Arla, and Hochwald to secure new contracts.

Vic Wirtz, the president of Prolek, expressed disappointment over the announcement but emphasized the cooperative's commitment to finding solutions for all its members. The news has prompted swift action from industry stakeholders and government representatives, who have organized crisis meetings to address the potential impact on Luxembourg’s dairy supply chain and rural economy.

Lactalis explained that the decision to end the contract was influenced by challenging conditions in the international dairy ingredient markets, including shrinking margins and the high cost of milk procurement in Luxembourg. Despite this, the company plans to continue operating the EKABE facility by sourcing milk from outside Luxembourg and has promised to support the affected producers during the transition period.

This development has highlighted the vulnerabilities within the Luxembourg dairy sector, underscoring the need for diversification and resilience amidst changing market dynamics.