European Union milk output will fall for a second successive year in 2022, US officials said, backing ideas that the bloc has passed “peak production” and is headed for long-term stagnation.

The US Department of Agriculture’s Brussels bureau pegged at 149.0m tonnes EU fluid milk production this year – representing, on their estimates, a fall of 384,000 tonnes year on year.

It would also for the first time, on a dataset going back to 1999, represent the first time that output, which hit a record 149.7m tonnes in 2020, has fallen for a second successive year.

The forecast is also more downbeat than the USDA’s official estimate of an increase of more than 1.0m tonnes in EU milk output this year.

The European Commission foresees production in the bloc – the world’s top fluid milk and cheese exporter, and second ranked in butter, skim milk powder and while milk powder – holding flat this year, “with a small increase in yields compensating for the decline of the dairy herd”.

‘Peak production passed’

However, the bureau said that “peak milk production was likely reached in 2020” in the EU, where output “has become increasingly constrained by environmental and animal welfare regulations.

“Dairy cow numbers… have decreased by more than 1.4m head since 2016, because lots of farmers are quitting dairying as they choose not to make the needed investments needed to meet the new requirements.”

The commission two years ago revealed a “farm-to-fork” (F2F) strategy aimed at reducing the environmental impact of EU farming, including curbs on emissions such as methane from the dairy herd.

The regime “is expected to lead to further consolidation of dairy farms as small and less efficient farmers may choose not to make the necessary investments to upgrade their barns and production equipment to the new F2F standards”, the USDA bureau said.

“This may well lead to further geographical concentration of milk production.”

‘Everyone pessimistic’

Some EU countries have added extra environmental constraints, notably in an effort to curb emissions of phosphates from dairy farms, and other livestock producers.

“Environmental restrictions have already brought the dairying intensification process to a halt before new F2F restrictions kick in,” noting moves by Belgium and the Netherlands, one of the EU’s big-three milk producers, last year to halt barn extension permits and ban nitrogen emission deposits in environmentally sensitive areas.

The comments tally with observations from some other commentators that EU output has peaked, with Nate Donnay, director dairy market insight at StoneX reporting that environmental rules were deemed by delegates at May’s Eucolait conference as sufficiently stringent to deter expansion.

“I asked, ‘what milk price would it take to get production growing again’, and the feeling was there isn’t a milk price that will increase production,” he said.

“Everyone I talked to at the conference was pessimistic about the ability for production to turn around and grow again.”

‘We could be surprised’

Data for April for milk output in the EU plus UK show a 2.1% dip in milk output, Mr Donnay said, although himself being more upbeat on production prospects, given high prices paid to farmers.

“Farmers who were considering exiting should be looking at positive cash flow in coming months,” as feed prices decline.

“As farmers feel more flush and have more confidence that [high milk] prices are going to hold for a while, we could be surprised by the growth at some point in 2023.”