In its Autumn 2022 agricultural markets short-term outlook, the European Commission projects milk collections over the full 2022 calendar year to fall 0.5% relative to the prior year before an additional decline of 0.2% in 2023. These negative output trends will be mostly driven by a declining dairy herd, but also low growth in average yields per cow in both 2022 and 2023 as hot and dry weather this summer negatively affected grass quality and availability in addition to lower crop yields. Many dairy farmers across the continent reportedly used some part of their winter feed during the summer.
Lower average fat and protein solids in milk negatively affects supplies available for manufacturing, and there is an anticipation of higher processing costs of milk powders drying. Cheese processing could become the preferred option, driven by high market prices and stable demand on the domestic and global market.