EU milk output growth to slow to eight-year low

21.10.2016

The growth in European Union milk production, blamed for deepening the dairy price downturn, will slow to a trickle in 2017, stemmed by the dent to producers' finances from the drop in values.

US Department of Agriculture staff in Europe, in their first estimates for next year, forecast that milk deliveries will grow 0.3% to 152,500 tonnes in 2017.

That represents a sharp slowdown from the growth of 1.1% to 152,000 tonnes expected for this year, and the 2.5% recorded in 2015, when it was spurred by the ditching of the EU's output quotas.

It would also be the slowest rate of growth in eight years.

Price drop

Milk output growth is declining due to the low level of farmgate prices, reflecting weakness in global values, until recently, which was blamed also on weak demand from Chinese importers.

"In July, the average price for raw milk amounted to E25 per 100 kilogrammes, and was 10% lower than in the same month of 2015," the report said, also flagging the impact on output of a newly-introduced EU scheme compensating farmers for producing less milk.

This scheme is expected to reduce milk deliveries in the last three months of 2016 by 1m tonnes and encourage cow slaughter - albeit providing a boost to the productivity of the retained herd.

The "higher culling rate of dairy cows… will have positive impact on the average milk yield of cows in 2016 and 2017, as farmers will keep their best cows and get rid of lower producing animals".

Prices to affect 2017 output

Nonetheless, EU milk output will fall into decline in the first half of 2017, the USDA report said, underling the dent from "low level of farm-gate milk prices".

The expectation of a rise in volumes in the second half of next year is reliant on expectations of the current recovery in values taking hold.

"The recovery of world market prices for dairy commodities, which started in the second half of 2016, is forecast to stimulate milk production in the second half of the year resulting in a slight overall increase of milk output in the entire [2017]."

 

agrimoney

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