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EU Dairy Sector Faces Production Declines Amid Policy Changes and Trade Developments

Learn why EU dairy production is expected to drop due to policy changes and new trade agreements. Will cheese production continue to grow while other dairy products decline?

Milk output is predicted to decrease from 149.3 million metric tonnes in 2023 to 148.9 MMT this year. Dairy professionals must understand these changes and their ramifications. This minor decrease is more than simply a figure; it represents more profound industry shifts impacted by rules on cow numbers and milk production efficiency. These developments are not isolated; they are part of a more significant revolution fueled by legislative shifts, economic constraints, and environmental obligations. The Common Agricultural Policy (CAP) and EU Green Deal programs influence farm economics and production decisions.

Meanwhile, regulations such as the Autonomous Trade Regulation, enacted in reaction to geopolitical crises, can affect feed pricing and supply. Understanding these factors is essential for grasping opportunities in the face of change. Join us as we discuss these critical problems facing the dairy business.

ProductProduction in 2023 (mmt)Production in 2024 (mmt)% Change
Milk149.3148.9-0.3%
Cheese10.5610.62+0.6%
Butter2.352.30-2.1%
Non-Fat Dry Milk (NFDM)1.721.62-5.8%
Whole Milk Powder (WMP)1.281.23-3.9%

The Intricate Weave of Policies Shaping the EU Dairy Sector 

The complex web of rules in the European Union is transforming the dairy industry. The Common Agricultural Policy (CAP) and the EU Green Deal are at the forefront of this transition. Revisions to the CAP, spurred by farmer protests in early 2024, are changing output incentives and operational standards. While these modifications improve sustainability, they also constrain dairy producers’ ability to keep or grow cow numbers. Parallel to the CAP, the EU Green Deal aims to reduce greenhouse gas emissions directly affecting cattle production. The Green Deal’s provisions for reducing animal numbers to decrease methane emissions have resulted in smaller dairy herds. According to an impartial analysis, these climatic objectives would reduce cattle productivity by 10-15%. 2024 EU milk output is predicted to fall from 149.3 million metric tons by 2023 to 148.9 million. This emphasizes the difficulty of reconciling sustainability with the economic realities of dairy production. As the industry navigates these constraints, regulatory compliance and production sustainability will determine the future of EU dairy. This interaction between policy and production necessitates reconsidering how agricultural and environmental objectives might promote ecological and economic sustainability.

USDA GAIN Report Signals Minor Dip in EU Milk Production Amid Policy-Induced Shifts

According to the USDA GAIN research, EU milk production is expected to fall slightly, from 149.3 million metric tonnes in 2023 to 148.9 million metric tonnes in 2024, owing to regulations impacting cow numbers and milk yield. The research also anticipates a 0.3% decrease in industry usage consumption. While cheese output is forecast to increase by 0.6% to 10.62 million metric tons, other essential dairy products will likely fall. Butter is expected to decline by 2.1%, nonfat dry milk by 5.8%, and whole milk powder by 3.9%, underscoring the industry’s more significant issues and adjustments.

Cheese Production: The Cornerstone of the EU Dairy Processing Industry 

The EU dairy processing business relies heavily on cheese production to meet high consumer demand in Europe and beyond. Cheese, deeply rooted in European culinary traditions, is a household staple in various foods. Its extended shelf life compared to fresh dairy products offers logistical advantages for both local and international commerce. Cheese’s versatility, ranging from high-value aged sorts to mass-market variants, enables manufacturers to access a broader market segment, enhancing profitability.

Cheese manufacturing is consistent with the EU’s aims of sustainability and quality. The procedure allows for more effective milk consumption, and byproducts such as whey may be utilized in other industries, minimizing waste. Cheese manufacturing supports many SMEs throughout the EU, boosting rural employment and community development.

EU-27 cheese output is expected to reach 10.62 million metric tonnes (MMT) in 2024, up 0.6% from 2023. This rise not only indicates strong market demand but also underscores the importance of cheese in the EU dairy sector’s strategy. The predicted growth in cheese exports and domestic consumption provides confidence in the industry’s direction and its ability to meet market demands.

Declining Butter, NFDM, and WMP Production Amid Strategic Shifts 

Butter, nonfat dry milk (NFDM), and whole milk powder (WMP) output are expected to fall by 2.1%, 5.8%, and 3.9%, respectively, reflecting more significant developments in the EU dairy industry. These decreases indicate a purposeful shift toward cheese manufacturing, prompted by market needs and legislative constraints. Reduced butter output may impact local markets and exports, possibly raising prices. Similarly, reducing NFDM and WMP output may affect sectors like baking and confectionery, requiring supply chain modifications and altering global trade balances. These modifications may also reflect the EU Green Deal and amended Common Agricultural Policy (CAP) ideas. Prioritizing cheese production, which generates greater economic returns and corresponds to current consumer trends, is a practical technique. However, this move may jeopardize dairy industry sustainability initiatives, emphasizing the need for continual innovation. The reduction in production in these dairy divisions influences global economic dynamics, trade ties, and market competitiveness. Adapting to these developments necessitates balancing quality standards, environmental compliance, and shifting customer choices that prioritize animal care and sustainability.

A Promising Trajectory for Cheese Exports and Domestic Consumption 

Forecasts for the rest of 2024 indicate a robust trend for EU cheese exports and domestic consumption. This expansion is driven by strategic export efforts and shifting consumer tastes, with cheese remaining fundamental to the EU’s dairy industry. Domestically, cheese is becoming a household staple, reflecting more excellent animal welfare standards and sustainable techniques. On the export front, free trade agreements and market liberalization, particularly after Brexit, create new opportunities for EU dairy goods. Cheese output is expected to exceed 10.62 million metric tons, demonstrating the sector’s flexibility and relevance in supplying local and international demand. As cheese exports increase, the EU may improve its market position by employing quality assurance and international certifications. Increased demand is anticipated to encourage more innovation and efficiency in the business, keeping the EU dairy market competitive globally.

Striking a Balance: Navigating Strains and Sustainability in EU Dairy Policies 

Stringent rules under the Common Agricultural Policy (CAP) and the EU Green Deal provide considerable hurdles to the EU dairy industry. Due to these rules, dairy producers suffer financial constraints, which require expensive investments in sustainable techniques without corresponding financial assistance. The Green Deal’s decrease in greenhouse gas emissions necessitates costly modifications to agricultural operations, such as improved manure management systems, methane-reducing feed additives, and renewable energy investments. These financial pressures are exacerbated by market uncertainty, making farmers’ livelihoods more vulnerable.

Farmers claim that the CAP’s emphasis on lowering animal numbers to fulfill environmental standards jeopardizes the profitability of dairy farming, especially for small, family-run farms that need more resources to make required improvements. The emotional toll on these families, many of whom have been in business for decades, complicates the situation. Furthermore, there is a notion that these policies ignore regional agricultural traditions and the diverse effects of environmental rules between EU member states.

In reaction to major farmer protests in March 2024, the EU Commission has proposed CAP reforms that aim to strike a balance between environmental aims and economic viability. These include excellent financial help for sustainable activities, such as grants and low-interest loans for environmentally friendly technologies, and flexible objectives considering regional variances. The reformed CAP also aims to increase farmer involvement in policymaking, ensuring that future policies are anchored in reality. By addressing these challenges, the EU hopes to build a dairy industry that is robust, sustainable, and economically viable.

The EU Green Deal: A Pivotal Force Driving Environmental Transformation in the Dairy Sector 

The EU Green Deal seeks to align the European Union with ambitious climate targets, emphasizing changing the agriculture sector, particularly dairy. This effort focuses on lowering carbon footprints via severe laws and incentive schemes. According to external research, meeting these criteria might result in a 10-15% drop in livestock numbers. The larger context of sustainable agriculture needs a balance between economic vitality and environmental purity. The EU Green Deal requires the dairy industry to embrace more organic and pasture-based systems, shifting away from intensive feeding techniques. This change has implications for farms and supply networks, altering feed pricing and logistics. The EU’s commitment to mitigating climate change via the Green Deal presents difficulties and possibilities for the dairy sector, encouraging new practices and changing established production models.

The Double-Edged Sword of EU Free Trade Agreements: Navigating Dairy Market Dynamics

The EU’s free trade agreements are critical to the survival of the dairy industry, bringing both possibilities and problems. These agreements seek to increase the worldwide competitiveness of EU dairy products by creating new markets and lowering tariffs. However, they also need a delicate balance to safeguard indigenous companies from international competition, often resulting in strategic industry reforms.

These trade agreements prioritize quality assurance and respect for international standards. Upholding tight quality standards and acquiring worldwide certifications help EU dairy products retain a robust global image, allowing for easier market access. Furthermore, the EU’s dedication to environmental and sustainability requirements demonstrates its dual emphasis on economic development and environmental stewardship.

The Autonomous Trade Measures Regulation (ATM), implemented in reaction to geopolitical concerns such as Russia’s invasion of Ukraine, influences the dairy industry by influencing feed pricing and availability. This, in turn, affects EU dairy producers’ production costs and tactics. As trade agreements change, the EU dairy industry must remain agile and resilient, using logistical knowledge and environmental stewardship to manage obstacles and capitalize on global possibilities.

The Ripple Effect of ATM: Strategic Imperatives for EU Dairy in a Tenuous Global Landscape

The Autonomous Trade Measures Regulation (ATM), adopted in June 2022, was a direct reaction to Russia’s invasion of Ukraine. This program temporarily attempted to liberalize trade for a restricted group of Ukrainian goods. This strategy has significant repercussions for the EU dairy business, notably regarding feed pricing and availability. The entry of Ukrainian agricultural goods has the potential to stabilize or lower feed prices, easing the burden on EU dairy producers facing growing production costs and severe environmental rules like the EU Green Deal.

The cheaper feed may assist in alleviating economic constraints and encourage farmers to maintain or slightly improve the milk supply. However, this optimistic forecast is tempered by persisting geopolitical uncertainty that jeopardizes continuous trade flows from Ukraine. The end of the war and establishing stable trade channels are critical to retaining these advantages. Any interruption might cause feed costs to rise, exposing the EU dairy industry to external shocks.

While ATM regulation provides immediate benefits, its long-term effectiveness mainly depends on geopolitical events. EU policymakers and industry stakeholders must remain watchful and adaptive, ensuring that contingency measures are in place to safeguard the dairy sector from future risks while balancing economic and environmental objectives.

The Bottom Line

The changing environment of the EU dairy business demands strategic adaptation among laws, trade agreements, and sustainability programs. Looking forward, dairy farmers must strike a balance between economic and environmental aims. Policies such as the Common Agricultural Policy and the EU Green Deal cause a modest decrease in milk output. Cheese production continues to be strong, with predicted growth in both output and consumption. Butter, nonfat dry milk, and whole milk powder output are expected to fall, indicating strategic industry movements. Adjustments like the Autonomous Trade Measures Regulation underscore the need for strategic planning. The EU’s approach to free trade agreements must strike a balance between market competitiveness and environmental integrity. Technological advancements, strategic relationships, and sustainable practices can help the industry succeed. Dairy producers must stay adaptable, knowledgeable, and dedicated to sustainability. Strategic planning and effort will allow the sector to thrive in this disruptive period.

Key Takeaways:

  • Milk Production Decline: EU milk production is forecasted to decrease from 149.3 million metric tonnes in 2023 to 148.9 mmt in 2024.
  • Policy Impacts: The reduction is influenced by policies affecting cow numbers and overall milk production.
  • USDA GAIN Report Insights: A 0.3% decrease in factory use consumption is anticipated in 2024.
  • Cheese Production Growth: EU-27 cheese production is expected to reach 10.62 mmt in 2024, a 0.6% increase from 2023.
  • Declining Production of Other Dairy Products: Butter, non-fat dry milk (NFDM), and whole milk powder (WMP) production are anticipated to decrease by 2.1%, 5.8%, and 3.9% respectively.
  • Rising Cheese Demand: Both cheese exports and domestic consumption are forecasted to rise in 2024.
  • Policy Challenges: The Common Agricultural Policy (CAP) and the EU Green Deal initiatives are influencing farmers’ production decisions.
  • Trade Dynamics: The EU is engaging in multiple free trade agreements, including concessions on dairy, while the Autonomous Trade Measures Regulation (ATM) could impact feed prices and availability.

Summary:

Milk output is expected to decrease from 149.3 million metric tonnes in 2023 to 148.9 MMT this year due to industry shifts influenced by cow numbers and milk production efficiency rules. These developments are part of a larger revolution driven by legislative shifts, economic constraints, and environmental obligations. The Common Agricultural Policy (CAP) and the EU Green Deal programs influence farm economics and production decisions, with Regulations like the Autonomous Trade Regulation affecting feed pricing and supply. The EU dairy industry faces significant challenges due to strict rules under the CAP and the EU Green Deal, which require expensive investments in sustainable techniques without financial assistance. Farmers argue that these policies ignore regional agricultural traditions and the diverse effects of environmental rules between EU member states. The EU Commission proposed CAP reforms in March 2024 to strike a balance between environmental aims and economic viability.

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U.S. Cheese Production in April: Italian Cheese Surges, American Cheese Declines

Dive into April’s U.S. cheese production trends. Curious about the rise of Italian cheese and the decline of American cheese? Uncover the compelling data and regional details.

April presented a mixed landscape for U.S. cheese production, with both promising gains and notable declines. According to the USDA, total cheese output, excluding cottage cheese, reached 1.19 billion pounds, up 1.8% year-over-year but down 3% from March. Italian-type cheese production rose by 6.2% from last year to 504 million pounds, though it fell 2.8% from March. On the other hand, American cheese production declined by 4.7% year-over-year and 4.3% from March, totaling 468 million pounds. 

“The mixed trends in U.S. cheese production signal both resilience and challenges within the industry,” the USDA report suggests.

CategoryProduction (Million Pounds)Year-Over-Year ChangeMonth-Over-Month Change
Total Cheese (excluding cottage)1,190+1.8%-3.0%
Italian-Type Cheese504+6.2%-2.8%
American Cheese468-4.7%-4.3%
Butter208+5.3%-1.0%
Nonfat Dry Milk173-12.7%
Skim Milk Powder36.3-20.8%
Dry Whey+2.1%
Lactose-1.5%
Whey Protein Concentrate-6.1%
Hard Ice Cream64.7 million gallons+7.3%

Mixed Signals in April U.S. Cheese Production Reflecting Varied Trends 

According to the USDA data, total cheese output, excluding cottage cheese, reached 1.19 billion pounds in April. This marks a 1.8% increase compared to the same period last year but shows a 3% decrease from March. The production dynamics underscore a mixed trend in U.S. cheese production for the month, reflecting both year-over-year growth and month-over-month decline.

Italian Cheeses Shine Year-Over-Year Despite Monthly Dip

Italian-type cheese production showcased a remarkable upturn, reflecting a year-over-year surge of 6.2%, culminating at 504 million pounds. Despite this annual growth, the month-over-month comparison revealed a marginal dip of 2.8% from March. This duality underscores both the strong demand for Italian cheeses over the year and the seasonal or market-driven fluctuations that influence monthly production volumes.

American Cheese Production Faces Significant Challenges in April

Amid the intricate landscape of U.S. cheese production, American cheese has faced a particularly challenging month. Specifically, April witnessed a decline in American cheese output, both when compared year-over-year and month-over-month. Production fell by 4.7% from April last year, resulting in a total output of 468 million pounds. The month-over-month comparison is similarly bleak, with a 4.3% decrease from March, accentuating the downward trend in this particular cheese category. This dual decline highlights ongoing shifts within the industry, signaling potential adjustments in consumer demand and production focus.

Butter Production Sees Minor Monthly Dip Amidst Impressive Annual Growth 

Butter production trends exhibited a complex pattern, reflecting the overarching variability in the dairy sector. While there was a minor decline of just over 1% in butter output compared to March, the sector demonstrated resilience with a notable 5.3% increase compared to the same period last year. This duality in trends is indicative of broader market dynamics and seasonal production adjustments. In total, April’s butter production reached 208 million pounds, underscoring both the short-term and long-term shifts in the dairy landscape.

Sharp Declines in Dry Dairy Products Highlight April’s Downturn

Dry dairy products presented a downward trend in April, with significant declines observed in both nonfat dry milk and skim milk powder production. Nonfat dry milk saw a steep reduction, recording a 12.7% drop to reach a total of 173 million pounds. Skim milk powder production experienced an even sharper decline of 20.8%, culminating in a total output of 36.3 million pounds compared to the same period last year.

Contrasting Fortunes Within Dry Dairy Production Reflect April’s Complex Landscape 

Nevertheless, not all dry dairy products shared the same fate. Dry whey production, for instance, edged up by 2.1%, offering a glimmer of optimism amidst broader declines in the sector. Specifically, dry whey output reached notable levels, counteracting the overarching downtrend. Conversely, lactose production did not fare as well, registering a 1.5% decline. Even more striking was the significant 6.1% decrease in whey protein concentrate production. Collectively, these figures underscore the mixed results within the dry dairy product landscape, highlighting areas of both growth and notable declines.

Unprecedented Fluctuations in Frozen Dairy Production: Hard Ice Cream Surges While Other Categories Slide

Frozen dairy product output varied significantly in April, illustrating a mixture of trends within the industry. The production of hard ice cream notably climbed by an impressive 7.3%, reaching 64.7 million gallons. This increase stands in stark contrast to the declines observed in other frozen dairy categories. The production of low-fat ice cream, sherbet, and frozen yogurt all experienced downturns, highlighting the sector’s fluctuations and the diverse consumer preferences shaping production dynamics.

Regional Production Trends: Wisconsin’s Cheddar Supremacy and California’s Mozzarella Dominance

In examining regional production trends, the data reveals that Wisconsin continues to dominate the Cheddar cheese market, producing an impressive 60.38 million pounds in April. California follows, contributing 21.29 million pounds to the nation’s Cheddar cheese supply. 

Turning attention to Mozzarella, California leads with a substantial output of 134.14 million pounds, while Wisconsin is not far behind, generating 93.13 million pounds. This makes California the unrivaled leader in Mozzarella production, though Wisconsin’s figures are commendable. 

When looking at overall cheese production, Wisconsin emerges as the top-producing state with an aggregate output of 281.48 million pounds. California comes in second, followed closely by Idaho and New Mexico. These states collectively form the backbone of the U.S. cheese manufacturing industry, each playing a crucial role in meeting domestic and international demand.

The Bottom Line

April’s cheese production data from the USDA paints a complex picture of the dairy industry, characterized by both advancements and setbacks. Italian-type cheeses exhibited impressive year-over-year growth, driven by a notable 6.2% increase, even as they faced a slight month-over-month decrease. In stark contrast, American cheese suffered significant declines both annually and monthly, highlighting underlying production challenges. 

The broader dairy landscape reflected similar dualities. Butter production experienced a modest monthly dip but demonstrated robust annual growth. The production of dry dairy products such as nonfat dry milk and skim milk powder saw sharp drops, whereas dry whey managed a slight increase. 

Frozen dairy products also showed variability, with hard ice cream production surging, while other categories like low-fat ice cream and frozen yogurt declined. Regionally, Wisconsin and California continued to dominate specific cheese categories, underscoring their pivotal roles in national dairy production

Overall, these intricate trends underscore the multifaceted nature of the U.S. dairy industry, highlighting areas of growth and the need for strategic adjustments in response to declining segments.

Key Takeaways:

  • Total cheese production in April saw a slight year-over-year increase of 1.8%, despite a 3% drop from March.
  • Italian-type cheese production rose by 6.2% year-over-year but decreased by 2.8% from the previous month.
  • American cheese production experienced declines both year-over-year and month-over-month, down by 4.7% and 4.3% respectively.
  • Butter production was up by 5.3% compared to April of last year, although it saw a minor decline from March.
  • Dry dairy products faced significant declines: nonfat dry milk dropped by 12.7% and skim milk powder by 20.8% year-over-year.
  • Dry whey production slightly increased by 2.1%, while lactose and whey protein concentrate production declined by 1.5% and 6.1% respectively.
  • Hard ice cream production surged by 7.3%, but low-fat ice cream, sherbet, and frozen yogurt production all decreased.
  • Wisconsin led in Cheddar cheese production, contributing 60.38 million pounds, whereas California was the top producer of Mozzarella with 134.14 million pounds.

Summary: In April, U.S. cheese production experienced a mixed landscape, with both positive and negative trends. The USDA reported a total cheese output of 1.19 billion pounds, up 1.8% year-over-year but down 3% from March. Italian-type cheese production rose by 6.2% to 504 million pounds, while American cheese production declined by 4.7% year-over-year and 4.3% from March, totaling 468 million pounds. This dual decline highlights ongoing shifts within the industry, signaling potential adjustments in consumer demand and production focus. Butter production saw a minor monthly dip, while dry dairy products showed a downward trend, with significant declines observed in nonfat dry milk and skim milk powder production. Dry whey production edged up by 2.1%, but lactose production and whey protein concentrate production also saw a decline. Frozen dairy product output varied significantly, with hard ice cream production climbing by 7.3% to reach 64.7 million gallons. Wisconsin continues to dominate the Cheddar cheese market, producing an impressive 60.38 million pounds in April.

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