EU forecast rise in 2017 milk production

Published 16 March 17

Milk production in the EU-28 is expected to rise in 2017 on the back of improved yields, according to the European Commission. Although the dairy herd is forecast to shrink by 1.6% in 2017, it is expected that yields will continue to improve, by 2.0%, leading to a 0.6% rise in deliveries for the year.

The EU dairy herd is expected to shrink by roughly 380k head, with a large proportion of this reduction a direct result of the Netherland’s Phosphate Reduction Plan.

According to the Commission, EU-28 milk deliveries will rise through the spring and reach a similar level to 2016 by the end of the second quarter. Assuming prices paid to farmers do not drop significantly, it is expected that deliveries will continue to grow in the second half of the year, rising above previous year levels. 

EU Short Term Outlook

Several factors could impact on prices however, mainly related to growth in global milk supply and high SMP stock levels. Deliveries from both the US and New Zealand are likely to increase through the year, although demand for both butter and cheese remains strong. What remains to be seen is if the demand growth is sufficient to balance any rise in milk production without negatively impacting prices.

Another unknown is the impact the SMP intervention stocks will have on milk prices. Currently, high butter prices are sustaining milk prices, despite relatively low SMP prices. How and when these stocks are released, along with trends in butter prices, will play an important role on how milk prices develop through the year.