The EU dairy sector faces a continued decline in 2024 due to decreasing cow numbers, economic pressures, and stringent environmental regulations. Despite initial increases in milk deliveries, the overall production is forecast to shrink, with significant impacts expected from high production costs and adverse weather conditions.
Declining Cow Numbers
The USDA Global Agricultural Information Network (GAIN) report highlights a continuing decline in dairy cow numbers within the European Union. As of early 2024, the number of cows in milk has dropped below 20 million, reaching 19.7 million for the first time. This trend is expected to result in a 0.3% reduction in EU-27 cow milk production for the year.
Production Trends and Economic Pressures
Despite an initial 1.7% increase in milk deliveries during January-February 2024 compared to the same period in 2023, this growth is anticipated to wane throughout the year. Farmers who delayed exiting milk production are expected to withdraw later in 2024, impacting overall production levels. Milk production profitability has been declining since early 2023 due to falling farm-gate prices and high production costs for energy, fertilizers, and labor. This has led to a reduction in the number of dairy farmers, especially among smaller, less efficient operations.
Regulatory and Market Dynamics
The ongoing environmental regulations in the EU, particularly the Dutch and Irish strategies to reduce nitrogen emissions, are set to have a long-term impact on dairy cow herd sizes. These regulations require significant adjustments in farming practices, including reductions in livestock numbers and changes in manure management, which are expected to lead to further herd reductions.
In addition, the generational renewal challenge continues to affect the dairy sector. Younger farmers are increasingly reluctant to enter the industry due to its demanding nature and tight profit margins. This reluctance exacerbates the decline in dairy farming, as the industry struggles to attract new talent to replace retiring farmers.
On a global scale, the increased milk production among major dairy exporters like Australia, the US, and New Zealand, combined with weaker demand from major importers such as China and the Middle East, has led to a drop in EU milk prices. The global milk market’s oversupply, coupled with reduced import demand, has intensified price pressures on EU dairy producers, further contributing to the financial strain on the sector.
Impact of Feed and Weather Conditions
Feed availability and pasture conditions in early 2024 have generally been favorable across much of Europe. Warm temperatures and adequate rainfall in central regions have supported biomass accumulation, which is beneficial for feed availability. This positive outlook has helped mitigate some of the challenges faced by dairy farmers in these areas.
However, the situation is less favorable in northwest Europe. Countries like Ireland have experienced persistent wet soils and frequent rainfall, which have hindered access to fields and affected the regrowth of grasslands. These adverse conditions have been particularly detrimental to Ireland’s dairy industry, which relies heavily on pasture-based feeding systems. The wet weather has led to reduced grazing opportunities and lower milk production, highlighting the vulnerability of pasture-dependent dairy systems to weather fluctuations.
Moreover, while feed availability is expected to improve in many EU Member States throughout 2024, the high costs of energy and fertilizers continue to burden farmers. These elevated input costs, combined with declining farm-gate milk prices, have put additional pressure on dairy farm profitability, making it challenging for farmers to sustain their operations amidst these economic and environmental pressures.
2024 Production Forecast
In 2023, EU27 milk deliveries saw a slight decrease of 0.03% to 145.24 million metric tons (MMT), despite increases in Germany, the Netherlands, Poland, and stable production in Spain. This decrease was not enough to offset falls in France, Italy, and notably Ireland. For 2024, milk deliveries are forecast to decrease further to 144.8 MMT.
The EU dairy sector is grappling with ongoing challenges including declining cow numbers, economic pressures, and environmental regulations. The forecasted decrease in milk production for 2024 underscores the need for strategic adjustments and resilience measures to ensure the sector’s sustainability amid these persistent issues.
