Brussels, Belgium—Sustainability objectives could translate into a slowdown in annual growth in European Union (EU) milk production (0.5 percent per year), which will reach 162 million tons by 2031, according to the recently released EU agricultural outlook 2021-31 report.
Over the next decade, EU milk production will need to comply with higher environmental standards, leading to emissions’ reduction, also via reduced replacement rates, the report said. Also, benefits for biodiversity and soil health through the provision of valuable nutrients will lead to the growth of pasture-based production systems which currently represent around 19 percent of EU milk production.
Organic milk production is also expected to grow. While organic milk represented around 3.5 percent of the EU milk pool in 2019, it is likely to grow and could reach 8 percent in 2031. To satisfy this growth, the EU organic dairy herd is expected to double.
Of the EU’s biggest competitors, the EU milk production growth will lie between New Zealand’s (up 0.2 percent per year) and that of the US (up 1.2 percent). They will only account for around 13 percent of global growth between 2021 and 2031, while developing countries will grow the most, mainly driven by herd increase, however.
Despite the reduced growth rate, the EU will remain the largest dairy trade supplier (30 percent of global dairy trade in 2031) as the trade expansion of New Zealand, the EU’s main competitor, will be limited with the reduced production growth. By contrast, the US could gain (up 2.5 percentage points), creating some tensions in dairy commodities in particular.
Dairy demand growth is expected to be the strongest in Asia (more than 17 percent per year, excluding India), driven in particular by rising incomes and the westernization of diets, resulting in increasing use of dairy in food service. Asia is expected to be followed by Africa (14 percent per year), supported by a strong population and income growth.
Following trends, increasing demand for value-added products might not only support an increase in exports of final products such as cheese and fresh dairy products, but also result in an increase of flows for higher value-added commodities intended for processing in some markets. This is already the case for EU infant formula, for which exports to China fell in 2021. To some extent, this was compensated by increasing exports of whey powders and processing into infant formula domestically.
Cheese is set to benefit from more EU milk produced by 2031 (up 0.7 percent per year, close to 40 percent), while generating the highest value (around 40 billion euros). Skim milk powder and whey powders will follow in volume contribution to growth, but with higher value gap (5 billion and 3.5 billion euros, respectively).
The EU market will remain the main user of EU milk even if export could gain some shares (17 percent in 2031 compared to 15 percent in 2021).
Over the 2021-2031 period, more than half (57 percent) of the expanding EU cheese production could be absorbed by growing exports (3 percent per year), which would allow the EU to remain the world’s largest cheese exporter (47 percent), the report said. At the same time, the domestic per capita consumption growth could be limited, given the already high level.
EU fresh dairy products could benefit from increasing exports as well (around 1.8 million tons in 2031), while consumption in the EU, the main user, could slow down the decline (minus 0.2 percent compared to minus 0.5 percent).
This is mainly due to an increasing interest in organic and other differentiated products, which is expected to support drinking milk and yogurt while home cooking could favor cream consumption.
Export demand could support EU butter production (up 45,000 tons), due to the limited growth of New Zealand as the global butter trade would continue growing at a similar pace to 2011-2021 (up 10 perent compared to 2021), while EU demand growth could be relatively stable (0.2 percent per year).
Sustained increases in domestic processing use, growing import demand for high quality ingredients and an existing milk deficit in some expanding dairy consumers’ markets will support growth in EU milk powder production, albeit lower than that in 2011- 2021, the report said. As a result, the EU could keep its position in global skim milk powder and whey powders (both more than 30 percent), and whole milk powder (12 percent), in the latter case taking some markets from New Zealand.
While for skim milk powder, the main stimulus will come from export growth (more than 1 million tons reached by 2031, up 2 percent per year), domestic processing uses will drive production growth in whey powders and whole milk powder (70 percent and 60 percent production share in 2031).
