EUROPE – Milk production in Australia and the European Union is set to either plateau or fall as from 2023 as more farmers leave the business and switch to beef production.
In the European Union, a fall or a plateau in milk production is expected when the new Common Agricultural Policy (CAP) kicks off in 2023 under the Farm to Fork (F2F) and the EU’s Green Deal targeting climate neutrality by 2050.
Sector experts believe that a wave of dairy farm endings can be expected after 2022 under pressure from high production costs associated with producing milk that meets the F2F standards.
As dairy becomes expensive, USDA notes that smaller farms in the East, but also Portugal, have switched to beef cattle, which require less investments and have good export opportunities for live beef cattle.
Another limiting factor to EU milk production is the trend towards more extensive dairying programs like organic production, hay milk, and other practices, USDA notes.
In Germany, three consecutive years of drought, resulting in higher production costs, are leading to a decrease in production as many smaller farms quit the business.
In addition, higher participation in animal welfare labeling programs that require more space per animal result in fewer animals in the existing facilities, further constraining production.
Australia decline spiked by deregulation
In Australia, the story is the same but the factors driving lower production are totally different from those in the EU.
According to the USDA, dairy deregulation in Australia which was implemented two years ago has enabled some dairy farmers to invest in their business and others to sell and step away from the industry.
The policy also enabled the industry to gradually right-size and those farms that were in less efficient producing areas and were not competitive in the free-market arrangement could step away from the industry allowing it to consolidate.
Broadly, this resulted in there being a greater reduction in dairy farm numbers in the more northern tropical and sub-tropical regions than in the more southern temperate regions.
According to industry sources, labor shortages in combination with elevated dairy property prices may have triggered an increased number of dairy farmers choosing to retire earlier than planned.
The sale of some of these dairy farms has gone to conversion to beef cattle production, reducing the country’s overall dairy production capacity.
Marginal rise anticipated in 2022
Despite the challenges, USDA projects milk production in the European Union 27 Member States (EU27) to increase by 0.2 percent in 2022 to 150.45 million metric tons (MMT) compared to 2021.
Australia is expected to record a moderate increase in milk production to 9.1 million metric tons (MMT) after a falling in 2021 to an estimated 9.0 MMT, a one percent decline from 2020.
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