EU27 cheese gains at expense of butter, says USDA FAS

EU environmental restrictions and elevated input costs are depressing milk production in 27 European Union Member States (EU27), says Anna Galacia, writing in the US Department of Agriculture’s Foreign Agricultural Service semi-annual European Union Dairy and Products report. Additionally, the increase in cow productivity can no longer compensate for the decline in the EU27 dairy cow herd. As a result, EU27 cows’ milk production has been shrinking since 2021 and is forecast at 143.9 million metric ton (MT) for 2023, which is 0.55% down from 2022.

With declining milk deliveries, the processors are forecasted to have less milk available for factory use in 2023, which forces them to carefully assess for which products they will use the available milk, she observes. EU27 cheese production for 2023 is forecast to increase to 10.5 MMT as consumption continues to rise year after year. This comes at the expense of the production of butter, non-fat dry milk (NFDM), and whole milk powder (WMP).

The price of cheese is more stable versus the other products, and increasing consumption supports the higher cheese production, with consumers willing to pay more for high-end products or choosing cheaper types of cheese. However, following the drop in 2022 in EU27 cheese exports to main destinations, the 2023 export number is expected to stagnate, the USDA FAS says.

EU27 butter production, meanwhile, is forecast to decrease by 0.6% (13,000MT), with imports of butter seen as remaining at high levels. NFDM exports compete with others from other regions such as the US and New Zealand, and are forecast to shrink by about 1.5%.

From a policy perspective, apart from the expected EU dairy sectors’ concerns connected to the implementation of the new Common Agricultural Policy (CAP) and Farm-2-Fork (F2F) initiatives in 2023, the impact of the war in Ukraine will be addressed throughout 2023. Strengthening EU environmental and climate mitigation policies are expected to require additional non-productive investments and further erode dairy farming profitability, the report notes.

For more information visit fas.usda.gov