European Milk Production Continues Decline
Combined EU-27 and UK milk production totaled 29.2 billion pounds in August 2022, down 0.8% year-over-year, according to data released from Eurostat, CLAL, and the United Kingdom’s Department for Environment, Food and Rural Affairs. Year to date through August, milk production was lower relative to 2021 in Europe’s top-five milk-producing countries: Germany, France, the United Kingdom, the Netherlands, and Italy. However, in sixth-place Poland, milk production grew 1.9% in August 2022 vs. August 2021 and was tracking 2% ahead of its 2021 pace.
In 11 of the last 12 months, milk production in the EU-27 and United Kingdom has been down compared to the same month in the previous year, giving credence to reports that Europe’s dairy industry is shrinking. Due to land availability, grazing capacity, and regulations, European dairy producers have limited opportunities to expand. In addition, many older producers have been choosing to retire rather than pass their dairy to the next generation. For 2022, the European Commission’s Department for Agriculture and Rural Development predicted a 0.5% drop in milk production compared to 2021, which is notable given that output in 2021 compared to 2020 narrowly declined, even adjusted for leap year. Furthermore, the agency was not optimistic about growth prospects in 2023, predicting milk production would decline 0.2%.
Europe’s hot, dry summer was hard on crops. Farmers were expecting lower yields and will need their feed to last through winter, which could lead to culling cows or drying cows sooner than usual to manage feed inventories and costs. High energy costs and interest rates will also shrink producers’ margins. These factors will weigh on milk production through 2023. While Dairy Market News noted improved milk production, at times, in September and October relative to the same weeks in 2021, the continent will soon be heading into its seasonal production low. If demand remains strong, less milk production from Europe will cause global supplies to fall, creating more opportunities for dairy prices to increase.
October 19, 2022