EU milk production strong so far in 2020

Milk output in the European Union has been surprisingly strong with milk production through April 2020 running 2% ahead of last year, and the cheese export forecast is up, according to a global market analysis from the Foreign Agricultural Service of the US Department of Agriculture. There are, however, signs that milk production likely slowed in May and June due to dry conditions. The European Drought Monitor reported in June that “Some regions of Europe are facing a robust dry spell, following poor rainfall during April and May 2020. Particularly affected are central and northwestern European countries (ie, Germany, Belgium, the Netherlands, Ireland, and most of the UK).”

Eurostat data indicates that milk deliveries in May 2020 for France, Italy and the UK were down 2%, 8% and 1%, respectively compared to May 2019. In 2019 these three regions accounted for about one-third of the EU’s total milk deliveries. In Germany milk production in May was flat YOY, while in Ireland and the Czech Republic it was 3-4% higher.

Given these factors, for the balance of the year EU milk production is expected to slow during the summer but recover to some extent in the autumn. Consequently, the milk production forecast is revised up but only by 1% to 156.7 million tons, which represents a 1% increase over 2019 output.

The European Union cheese export forecast for 2020 is revised up by 3% to 925,000 tons, which represents an expansion of 5% over 2019. Year-to-date shipments this year have been about 9% ahead in comparison to the same period last year. However, shipments are expected to slow down during the second half of the year as the availability of industrial milk declines due to the seasonal decline in milk production.

Traditionally the US has been the largest market for EU cheese accounting for about 16 % of EU shipments in 2019. This year, shipments to the US import market through May are down about 11%. This may have been due to Covid-19 affecting the food service sector and the retaliatory tariffs of 25% imposed on imports of EU cheeses by the US starting in October 2019 over the WTO ruling in favour of the US over EU subsidies to Airbus. EU cheese shipments, particularly to the Ukraine, South Korea, and Japan markets have increased significantly.

To support the dairy market during the Covid-19 pandemic, in late April the European Union authorised the subsidisation of storage costs for up to 100,000 tons of cheese for between 60-180 days under the Private Storage Scheme. The cumulative volumes through end-of-June totalled 48,000 tons.
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