The initial quarter of the year has already seen a decline in overall EU milk production, primarily driven by a reduction in dairy cow numbers across North-Western Europe. This contraction comes despite otherwise favorable profit margins for farmers, indicating that regulatory pressures and other factors are beginning to outweigh economic incentives. The trend suggests a shrinking supply base that could struggle to meet robust demand if stricter environmental policies are enacted.

Adding to the challenges, the European dairy sector faces ongoing threats from animal diseases, specifically mentioning outbreaks of foot and mouth disease and the Bluetongue virus. Such health crises can decimate herds, disrupt supply chains, and inflict substantial financial losses on farmers, further compounding the pressures on milk production across the continent. Vigilance and effective biosecurity measures are paramount for all agribusiness stakeholders.

While global demand for dairy products remains robust, the Rabobank report highlights two looming policy decisions that could dramatically impact the EU’s dairy market: potential tariffs and, critically, Ireland’s nitrates derogation status. The outcome of Ireland’s request to retain its nitrates derogation is particularly significant, as its rejection could force dairy farmers to reduce their herd sizes, directly curtailing milk output from a key producing nation.