EU’s glacial change

The strong focus on greener outcomes for the EU community are driving major policy settings that skew towards limiting the output of raw milk. Meanwhile there are seemingly conflicting objectives of improving food security. Go figure!

EU’s dairy production sector has long been in a period of transition since the end of direct subsidies paid to producers and exporters, and the phasing out of production quotas to limit farm output and manage the stability of milk prices. Rather than explode out of the blocks and reach the unshackled production potential, milk growth has slowed since the relaxation of quotas. Across the regions and segments, some producers search for their potential; marginal producers are adjusting and exiting; while EU communities have cranked up the scrutiny of what happens inside the farmgate – in terms of animal welfare, impact on air, soils and waterways.

Producers are gradually being weaned of supports but political pressure from the farm lobby remains highly influential. The EU Commission sets the aggressive policy, while country governments play “bad cop” in setting the effective regulation and cop the political heat.

The European Environment Agency highlighted that the EU is well behind in most environmental and sustainability targets. For Europe to become a sustainable, climate friendly continent that stays within the planetary boundaries, it has to quickly implement deep systemic changes.

The ambitious Green Deal policy will lift the intensity of pressure on farms – not just in terms of the drive to reach net zero by 2050. There will be a range of measures to impinge on the footprint of dairy farms and keep upward pressure on operating costs.  

The EU dairy farm sector is meanwhile faced with several major socio-economic challenges, including fluctuating market prices, high labour costs and aging demographics. Can it continue to grow to meet the ever-complex demands of it own citizens and the market regions dependent on its products and brands?

What does this impact?

The balance sheet of the EU dairy sector has – since the regulatory shackles were stripped from the supply chain – driven the value of dairy commodities across the world market It is difficult to envisage a future where the EU industry sustains an expansion in milk output, which in our assessment has a profound effect on global markets.