The European Commission’s (EC) Spring 2021 Short-term outlook projects EU-27 milk deliveries to increase 1% YOY this year to 146.8bn kg, the result of a 2% YOY increase in average yield per cow and despite a 0.9% YOY contraction in dairy cow numbers. The growth in supplies should continue after the likely contraction during Q1-21, with current concerns of high feed prices offset by favourable spring weather conditions to produce home-grown feed. The expansion in milk production this year is expected to be driven by Ireland, Poland, Italy and the Netherlands. Manufacture of all major commodity products is expected to increase this year, with the cheese stream to absorb 21% of the extra milk produced in 2021.

The EU dairy sector proved resilient during the global COVID pandemic, and demand for cheese and butter is expected to grow further with the gradual re-opening of foodservice establishments particularly into H2-21. This would support commodity dairy product prices and in turn producer payouts.