EU lowers production forecast

Published 17 October 18

According to the EU Commission, production of most dairy products was up in the first 7 months of 2018, supported by the growth in milk supplies. However, the adverse weather conditions this summer have led to a downward revision in full year supply expectations. The impact of higher costs and reduced herds is expected to limit the overall annual increase to 0.8%.

The limited availability of milk supplies in the back half of the year has also affected expectations for production of key products. Butter, SMP and WMP production are not predicted to grow year on year. Instead, the limited milk supplies are more likely to flow into cheese production, as this continues to provide better returns.

In terms of trade, only cheese and SMP exports are expected to exceed last year levels, with both butter and WMP likely to fall below. The rising demand for cheese in key importing countries is assumed to continue to support cheese exports. The growth in SMP exports is primarily due to rising sales to the Middle East, where demand is driven by low prices. By contrast, with more focus on quality, exports of SMP to Asian markets continue to fall. However, for both butter and WMP, exports look set to finish the year at lower levels than in 2017 as a result of uncompetitive pricing.

 EU lowers production forecast