The EU dairy forecast for 2025 predicts a drop in milk production and policy shifts. What does this mean for your operations? Learn strategies to tackle these challenges.

Summary:

As we navigate the evolving landscape of the EU dairy industry, 2025 stands poised as a year of pivotal change. Milk production is forecasted to decline due to dwindling cow numbers, tight margins, and stringent environmental regulations, presenting the industry with challenges. This decline is complemented by a decrease in fluid milk consumption and factory use, significantly altering the dynamics of production priorities. In this shifting environment, cheese production emerges as the focal point, driven by steady domestic and export demand despite pressing policy and market challenges. Butter, non-fat dry milk, and whole milk powder production are set to decrease, reflecting a strategic pivot towards cheese. The sector remains a major player globally, with strong cheese production and impressive export demand. Still, the future of the EU dairy sector depends on how it handles environmental rules and adjusts to changing consumer preferences. Decreased cow numbers and strict regulations can lead to fewer cows and less milk production, threatening long-term herd health and stability. However, the market offers opportunities for innovative dairy farmers, particularly in cheese demand, making careful planning, strategic investment, and adaptability essential for success.

Key Takeaways:

• EU milk production is forecast to decline in 2025, driven by decreasing cow numbers, environmental challenges, tight margins, and disease outbreaks.
• The dairy processing industry’s primary focus remains cheese production, spurred by robust domestic consumption and export demand.
• Lower milk availability favors cheese production over butter, non-fat dry milk, and whole milk powder.
• EU policy changes, specifically the CAP and the Green Deal, are a significant concern for the dairy sector’s profitability and sustainability.
• International trade dynamics, including the impact of competition from Oceania and regulatory frameworks, will shape the future of the EU dairy export market.

2025 is a crucial year for the EU dairy sector, which is very important to European agriculture economically and culturally. The industry affects many lives, from rural areas to busy cities, and is now at a turning point. Dairy farmers and industry professionals face fewer cows, strict environmental rules, and changing market needs. These issues require a quick rethinking of strategies to stay sustainable and profitable. Understanding these changes is essential for success in this shifting environment. 

Facing the Dairy Divide: EU’s Balancing Act in 2024

The EU dairy industry is at a crucial point in 2024, facing challenges and opportunities. Despite the hurdles, this sector remains vital to the EU’s economy, making up much of agriculture. In 2024, EU milk production was estimated at 145.6 million metric tonnes (mmt), a bit more than the year before. However, cow milk deliveries slightly fell due to environmental rules and disease outbreaks affecting livestock. These issues have led to fewer cows, raising concerns for the industry. Yet, the sector’s resilience is evident as it navigates these challenges. 

Despite these obstacles, the EU dairy sector is still a major player worldwide, with an impact that extends beyond Europe. Cheese production is strong, fueled by local consumption and high export demand. With cheese, butter, and non-fat dry milk shipments reaching impressive levels, the EU’s position in key markets helps its reputation as a leading force in the dairy trade. 

Moreover, the sector’s impact isn’t just about production numbers; it’s vital to the EU’s rural areas, providing jobs and supporting family farms throughout the region. Its role is evident in how it balances between meeting local needs and catering to global consumption demands. 

However, the industry’s future depends powerfully on how it handles upcoming environmental rules and adjusts to changing consumer preferences in the EU and internationally.

Navigating the Crosswinds: The EU Dairy Sector’s Tough Terrain Ahead 

The EU dairy sector is facing a tough situation, with many challenges that could change its outlook by 2025. One major issue is the decline in cow numbers. This decline, driven by low farming profits that encourage farmers to switch to less demanding jobs, is a significant concern. When profits are thin, keeping operations running becomes increasingly tricky. The heavy financial pressure pushes smaller farms to struggle or leave the business, decreasing milk production. 

Strict environmental rules add to this. Farmers face higher costs and challenges meeting new standards as the push to meet climate goals increases. These include sustainable practices that, while helpful in the long run, require upfront spending and further stretch tight budgets. These regulations aim to address climate change but also cause a short-term drop in milk production as resources shift to follow the rules instead of boosting output. 

Another issue is cattle’s vulnerability to diseases. Diseases lead to less milk, more veterinary care expenses, and stronger safety measures. The impact is not only on immediate productivity but also long-term herd health and financial stability. 

These problems suggest a drop in milk production by 2025. EU farmers must rethink their strategies and adapt their dairy farming methods to address these challenges. 

Seizing the Cheese: Unveiling Opportunities Amidst EU Dairy Challenges

Despite challenges, the EU dairy market offers innovative dairy farmers and processors excellent opportunities. The growing demand for cheese presents a fertile ground for innovation. As cheese remains popular both locally and abroad, dairy farmers can aim to boost cheese production. Processors can use advanced technology and build strong supply chains to meet local and global needs. This innovation potential can inspire the industry to overcome its challenges. 

By learning from top global practices, EU dairy businesses can find niche markets and develop unique cheese varieties. This can use the varied types of regional cheeses to reach gourmet markets globally, increasing profits and driving sector innovation. Targeting emerging markets where Western food habits are becoming popular for cheese exporters can create new revenue and lessen reliance on crowded markets. 

Focusing on cheese production also helps with environmental goals. Since cheese needs more milk, it could lead to practices that result in higher milk yields per cow, possibly reducing the number of cows and their emissions. This aligns with eco-friendly trends, making EU cheese attractive for its quality and environmental benefits. 

Another opportunity is to explore different export markets and form strategic partnerships with global distributors and retailers. By understanding various consumer preferences and quality standards, EU cheese producers can strengthen their presence in established and new markets. This approach not only expands market reach but also provides opportunities for knowledge exchange and innovation, as EU producers can learn from and adapt to the practices of their international partners to remain competitive. 

Ultimately, success in these opportunities requires careful planning, strategic investment, and readiness to adapt to changing consumer demands. As the dairy industry changes, those who act carefully and adaptively can survive and thrive in this dynamic market. This emphasis on strategic planning and adaptability can empower the industry to take control of its future.

Cheese Reigns Supreme: A New Dawn for EU Dairy 

The rise in cheese production marks a significant change for the EU’s dairy industry, driven by several key factors. Leading this trend is strong local demand, a sign of a recovering economy with people spending more, and a lively hospitality sector. As incomes return to their previous levels, people show their taste for good dairy products, especially cheese, making it a significant part of European diets. 

However, local demand is only one of the factors shaping this future. The ongoing and growing demand from exports makes cheese production even more attractive. Over half of EU cheese exports go to key partners—the UK, US, Japan, and Switzerland—and these countries play a significant role. Each has a developed taste for European cheese and is a gateway to broader distribution beyond the EU. 

This move towards cheese is more than just taking advantage of demand; it’s necessary due to the resource limits faced by dairy farmers. With less milk production predicted, priorities must be set. Cheese production is more profitable than making butter or milk powders with duller market prospects. So, focusing milk supply on cheese matches market demands and makes economic sense, potentially steadying an otherwise shaky industry. 

The effects of this shift towards cheese production are significant as we look to 2025. While the focus on cheese aligns supply with demand, it may cause industry shifts: the need for specialized equipment targeted marketing strategies, and possible retraining of workers to cater to this change. However, the shift towards cheese production also presents new employment opportunities, particularly in cheese production, marketing, and distribution. Moreover, international demand adds a competitive edge, pushing EU producers to create unique, high-quality products that stand out in a crowded global market. 

In the end, the rise in cheese production not only shows adaptation strategies but also highlights new opportunities. This change invites the entire industry to rethink their priorities, inspiring a joint movement toward a future where cheese isn’t just another product but perhaps the key to the EU dairy sector’s success.

Reshaping the EU Dairy Mosaic: A Shift Towards Cheese Dominance

In the changing world of EU dairy production, more milk is used to make cheese. This means less milk is used to make butter, non-fat dry milk, and whole milk powder. As cheese becomes more popular and exports grow, the production and sales of these other products are dropping. 

Butter is expected to produce less because people choose butter substitutes for health reasons. With less milk going towards butter, its production will likely decrease as more milk is used for cheese. Cheese’s growing popularity is also pushing its demand higher than butter’s. The market is set for tough times since domestic demand for butter is decreasing and cheese exports are rising. 

Non-fat dry milk is facing similar issues. Changes in diets and weak demand from other countries, especially China, are leading to a forecasted decrease in production. Since cheese is the priority, non-fat dry milk must be paid more attention. The focus on cheese highlights the challenges for products like non-fat dry milk, particularly when demand from the feed sector drops. 

Whole milk powder production is also expected to decrease by 5%. As cheese becomes more critical, whole milk powder is becoming less market-focused. High prices make food processors look for alternatives, reducing the demand for whole milk powder. Competition from New Zealand and less interest from major buyers like China make it harder for whole milk powder to thrive. 

This shift in milk usage is changing the EU dairy market. By focusing on cheese, the EU responds to today’s market needs and sets a future path where cheese is key. Other dairy products adjust to this new reality.

Straddling Giants: CAP and the Green Deal’s Impact on EU Dairy 

The Common Agricultural Policy (CAP) and the EU Green Deal significantly influence the future of the EU dairy sector. While these policies aim to protect the environment, they also significantly change dairy farmers. The CAP tries to support sustainable farming, but following its rules often means extra costs for farmers. These expenses can hurt profits, making small farmers question whether they should continue farming. 

The EU Green Deal emphasizes ecological goals, adding more challenges. It pushes dairy farmers to switch to green practices, which might require significant initial investments. Although the goal is a more sustainable future, the initial costs can be overwhelming, possibly discouraging new farmers and making existing ones rethink their plans. 

Major milk-producing countries, such as Germany, France, Poland, the Netherlands, Italy, and Ireland, produce almost 70% of EU milk. The CAP plans and the Green Deal rules are crucial to these countries’ dairy strategies. These countries often invest in technology to improve efficiency and sustainability and diversify their products to meet changing consumer preferences. 

However, these changes require careful attention. Strict environmental rules and competition from global markets may cause industry shifts. Dairy leaders are moving towards sustainable practices, but there are concerns over whether these changes can happen without harming the economic core that supports the EU’s rich dairy heritage.

Charting New Waters: EU Dairy’s Strategic Navigation Through Global Trade Currents

The EU dairy sector faces a changing international trade landscape filled with competition and changing demand. The rules for importing and exporting dairy products set challenges and opportunities in motion. 

Import rules, often set under special agreements, allow some products to enter the EU with lower or no import tax. These rules help keep the dairy market balanced and meet domestic needs. New regulations, like Commission Delegated Regulation (EU) 2020/760 and Commission Implementing Regulation (EU) 2020/761, have added strict guidelines that affect how businesses make decisions to increase their market presence. 

The EU leans heavily on global export demand, making competition from other countries crucial for its success. Key export markets such as the UK, US, Japan, and Switzerland take in large volumes, with over half of EU exports going to these places. Close ties to the UK and good trade connections with Japan and the US stabilize the EU against market changes. 

Yet, changes in global demand due to economic or geopolitical issues can severely affect EU dairy exports. For example, the recent drop in Chinese demand for non-fat dry milk has affected production choices. Competition from countries like New Zealand adds another challenge, as they all fight for market share in price-sensitive areas. 

To succeed, EU dairy processors must stay flexible and adjust their strategies to stay relevant. Specialties like EU-produced cheeses remain in demand, offering some relief. However, adapting to production and understanding regional needs and economies are key. While trade rules and global shifts are strict, they can also lead to growth if handled smartly.

The Bottom Line

The EU dairy landscape in 2025 brings both challenges and opportunities. Fewer cows and strict policies are causing milk production to drop, while environmental and economic issues add pressure. But the demand for cheese offers a bright spot, inspiring processors to find new ways to adapt. With cheese production taking priority over butter and milk powder, dairy farmers and industry professionals must be flexible. This situation raises important questions: How can you capitalize on the growing cheese market in your operations? How can you ease the impact of policy changes and environmental concerns on your business? The EU’s dairy industry is changing. Are you prepared to find your place in this new landscape?

Learn more:

• EU’s 2024 Milk Production: Stability Amidst Market Roller Coaster
• EU Dairy Decline: 2024 Milk Production Forecasted to Drop 0.3% Amid Lower Cow Numbers and Rising Costs
• Global Dairy Market Trends July 2024: Australia’s Rise as Argentina and New Zealand Face Challenges

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