In 2022, milk production in the European Union 27 Member States (EU27) is forecast to increase by 0.2 percent to 150.45 million metric tons (MMT) compared to 2021. As EU liquid milk consumption is flat, most additional milk goes to processing. Cheese production is the main use and EU27 cheese production is forecast to increase to 10.4 MMT, which is 50,000 MT more than in 2021 and 168,000 MT more than in 2020. Both EU domestic cheese consumption and exports continue to increase. EU butter production is forecast to recover to 2.14 MMT in 2022, after a decrease in 2021 compared to 2020, for lack of milk and at the expense of exports. Non-Fat Dry Milk production is also forecast to recover to 1.56 MMT in 2022, after a decrease in 2021 compared to 2020, resulting in lower exports. EU27 Whole Dry Milk production is most affected by stagnating milk production, with significant production cuts in both 2021 and 2022 and lower exports
After the EU milk production quota system ended on April 1, 2015, EU27+UK dairy production increased from 154.5 million metric tons (MMT) in 2015 to 162.2 MMT in 2020, with the largest relative milk production increases in Ireland, Bulgaria, Romania, and the Czech Republic. However, this growing trend is stagnating as environmental restrictions are impacting milk production and leading to a decreasing supply in many Northwestern European Member States (MS). Some EU dairy industry experts believe that EU milk production may decline in 2022 and 2023, when the new CAP and the accompanying F2F conditionalities require EU dairy farmers to adjust their production systems.
Meanwhile, Post forecasts the EU27 milk production for 2022 to increase slightly by 0.2 percent to 150.45 MMT of total milk collected. This is a similar increase as in 2021, despite a 0.1 reduction after 7-months of deliveries compared to 2020. The increase in production of non-cow milk remains strong as consumers’ appreciation for goat and ewe derived dairy products, mainly cheeses, continues to increase.
As drinking milk consumption in the EU is rather stable, despite some surge in 2020 when COVID-19 kept people home, most of the additional milk goes to dairy processing. EU dairy processing has long been driven by cheese production, and this trend is expected to continue as several new cheese plants have emerged in recent years, mainly for the production of industrial mozzarella for the food processing industry. The COVID-19 pandemic has put this business model under pressure as consumers have veered from eating out to home cooking as telework greatly increased. At the onset of the pandemic, dairy processors had to reformulate products for ready-to-eat meal producers, as well as adapt their packaging and logistics to retail customers.
The resulting, albeit short-termed, turmoil in the market led the EC to set up a Private Storage Aid (PSA) scheme for cheese, butter, and NFDM. Nevertheless, EU27 cheese production for 2022 is forecast to increase to 10.4 MMT, an increase of 50,000 MT over 2021 and almost 170,000 MT higher than production in 2020. EU cheese consumption continues to increase year after year and this is expected to continue through 2022, albeit at a slowing pace. However, the consumer appetite for GI and local cheeses, including goat cheeses, is
growing more strongly, with higher returns for processors and local farmers alike. The slowing increase in cheese production is affecting EU27 cheese exports negatively, especially in 2021, as increasing prices, together with a strong Euro, is eroding the competitiveness of EU cheeses on international markets. However, in spite of the halt in tourism, which drives consumption of specialty cheeses, this
does not pertain to GI cheeses, which continue to have strong exports.
Contrary to cheese, the EU butter market is mature, with the market growing more slowly than the demographic expansion. Also, the ageing population is looking for healthier eating patterns. After a 1 percent decrease in 2021 compared to 2020, EU27 butter production is forecast to slightly recover to 2.14 MMT in 2022. EU27 domestic consumption decreased at the onset of the COVID-19 crisis, but is
expected to expand again in 2021 and 2022. EU27 butter trade for 2022 is forecast to slightly recover again after an expected 20 percent decrease in 2021 compared to a bumper 2020 because of increased EU butter prices in response to the decrease in production.
Non-Fat Dry Milk (NFDM) or Skimmed Milk Powder (SMP) production in the EU is the residual product from EU butter and cream production. Consequently, its production more or less follows butter production.
Therefore, EU27 2022 NFDM production is forecast to slightly recover again after a 3 percent dip in 2021, compared to 2020. EU27 NFDM production in 2020 was high after the large EU NFDM intervention stocks, built in 2015 and 2016 in response to the dairy crisis after the end of the EU production quota system, were sold out in 2019. More than half of EU NFDM production is exported.
The proximity of Northern Africa and the Middle East make countries like Algeria, Oman, and Nigeria top export destinations for EU NFDM. Domestic consumption is led by feed consumption for veal production, but commercial stocks may conceal actual consumption. While the PSA scheme was particularly set up to support NFDM prices in May 2020, after prices in Lithuania and Germany decreased to the EU intervention price, triggering the intervention buying program, very little NFDM was contracted for intervention as prices rapidly veered up again.
The EU Whole Milk Powder (WMP) market is limited to a stable food industry consumption and production is mainly driven by WMP export demand offering a better return over the butter + NFDM complex. The EU has a hard time competing for WMP exports with New Zealand. For 2022, EU27 WMP production is forecast to further decrease after it already decreased by 20 percent in 2021,
compared to 2020. While EU domestic consumption in 2022 will also decrease, exports are forecast to decrease to a level to supply only traditional customers in the EU neighborhood.
From a policy perspective, Brexit, COVID-19, and the U.S. Airbus tariffs have been important factorsaffecting European dairy markets, together with consecutive droughts affecting milk production. For the near future, the new Common Agricultural Policy (CAP) and the Farm to Fork Strategy (F2F), together with the EU strengthening its environmental and climate mitigation policies, will dominate the EU dairy sectors’ concerns. Impact studies forecast these policy initiatives to drive EU dairy production down. Already, the major industry players are adapting their corporate plans and strategies towards their most profitable and strategic interests.