EU dairy prices at record levels; farmers' margins remain tight

Milk deliveries expected to decline 0.6% in 2022
calendar icon 23 August 2022
clock icon 2 minute read

According to the latest data and reflections of market experts within the European Commission, EU dairy prices are at record levels. While skimmed milk powder and whole milk powder prices remain relatively stable and whey prices are showing some decline, others continue to rise. This has seen EU raw milk prices reach record highs. Despite this, farmers' margins remain tight due to higher input costs. Dry and warm weather conditions in spring affected grass quality and the availability of other feed ratio components, which could see milk yield development being lower than expected in 2022.

This, along with a smaller dairy herd (-1%), combine to result in an expected decline of 0.6% in EU milk deliveries in 2022. The lower grass quality and lower feed use are also likely to decrease the milk fat and protein content, thus reducing the availability of milk solids for further processing.

In 2021, the EU milk sector experienced unprecedented developments. The seasonal trend historically observed in the EU raw milk price did not materialise and prices grew throughout the year. Despite the price increase, EU milk deliveries dropped by 0.4%, for the first time since 2009. The rising costs slowed down the milk yield growth (1.2%) and led to a stronger than expected dairy herd reduction (-1.5%).

EU cheese and cream production could continue to grow and reduce milk fat availability for butter and whole milk powder production. An increase in cheese exports is expected, while domestic use of dairy products could grow slightly in 2022 (+0.3%), assuming sustained retail sales and foodservice recovery, as well as limited transmission of higher producer prices along the chain to consumers.

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