Research

Adapting to change: Strategies for EU dairy processors amid milk supply decline

11 December 2025 10:00 RaboResearch

EU milk supply is projected to fall 5% by 2035, driven by regulations, buyouts, and climate pressures, with stark regional differences and strategic implications.

Intro

The European milk pool is projected to decline by around 5% over the next decade, signaling a period of potential disruption for EU dairy supply chains. While this contraction will be felt across the region, its impact will vary by geography, creating nuanced challenges for processors and farmers alike.

The reduction in milk supply stems from a confluence of factors:

    Policy pressures: EU and national regulations on the environment (including buyout programs and additional taxation) and animal welfare are increasing compliance costs. Demographic shifts: An aging farming population and rural depopulation compound labor shortages. Climate impact: Global warming adds further stress to production systems.

Together, these dynamics diminish competitiveness and reduce the overall milk pool available for processing.

The implications for dairy companies are clear. A contracting milk pool will require strategic adaptation, particularly for processors heavily exposed to EU regions with diminishing milk supply. Key strategic levers include:

    Corporate activity: Exploring mergers or acquisitions to secure supply. Milk procurement strategies: Offering farmers more attractive conditions - such as transparent milk prices, performance-based bonuses, sign-on bonuses, and lower entry barriers for cooperative membership - to retain and attract suppliers. Geographic diversification: Expanding the asset base to EU regions with growth potential or, for companies with overseas production facilities, reducing dependence on Europe for sourcing dairy raw materials.

From a strategic outlook perspective, these measures aim to maintain production capacity and meet customer demand despite shrinking local milk pools. Companies that act early to secure supply and optimize milk utilization will be better positioned to navigate this structural shift.

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