Bluetongue to dent EU milk supply

Dairy market analysts predict that bluetongue will dent milk supply in the EU’s major milk-producing countires this year.

Christophe Lafougere, CEO of dairy market analysts GIRA, told the Bord Bia dairy markets seminar in the Killashee Hotel last week that as a consequence of bluetongue German milk supply could fall by 1.7% this year, a drop of 546m litres on 2024 supply.

Production is also expected to fall in France and the Netherlands by 1.2%, respectively. This would translate to a drop of 284m litres in France and a drop of 163m litres in Netherlands.

It expects Irish milk supply to increase by 2.5%, a rise of over 210m litres, and Polish supplies could increase by almost 300m litres.

The fertility of dairy cows affected by bluetongue goes below 50% and 30% of cows in affected herds end up empty, according to Lafougere.

He said that mortality goes up and milk yield goes down and it takes a long time for cows to get back on track, if at all, after being infected. He also expects European milk supply to be subdued in 2026 also.

Dairy consumption

The seminar heard that the consumption of drinking milk is increasing, with Lafougere very positive on the outlook for milk consumption in Europe; “Drinking milk is getting better and better.

That is a new trend. If the trends are right, we are going to have less milk in Europe and we will require more milk for drinking, so potentially we are going to see more arbitrage [trading] of milk, particularly between countries like Germany, France and Holland.

“The extra milk that is being consumed is full fat milk, so there is less fat available for butter and cream also,” he said.

The consumption of yogurt in Europe is increasing sharply and Lafougere says this is being replicated in the US and Canada.

In terms of growing markets, Lafougere said that southeast Asia will outperform China as the region with the largest dairy imports.

Interestingly, southeast Asia had similar dairy imports as China in 2019 but has since surpassed China in terms of import volumes.

GIRA expects south-east asian imports to increase by 2.5% per annum and, importantly, Lafougere says that dairy in the region must come from imports, as unlike China there is no substantial domestic dairy industry in the region.

Exports of fat-filled milk powder from Europe to sub-Saharan Africa will be under pressure into the future, the conference heard.

The new EU regulations on deforestation, coming into force at the end of 2025 mean that palm oil will be more expensive thereby making European fat-filled powders less competitive.

Global production

Protein is the big growth area but 75% of dairy proteins are commodity products like skim and whole milk powder (WMP). GIRA is predicting that global production of WMP is set to reduce while skim milk powder (SMP) is set to remain steady between now and 2029.

Together, SMP and WMP constitute 75% of total dairy proteins but the big growth area will be in whey protein concentrates, used in infant and adult formula and functional foods.

The push towards natural foods with few ingredients is a real opportunity for dairy in light of the Make America Healthy Again (MAHA) movement, Lu Ann Williams from Innova market insights said.

In February, US president, Donald Trump, set up the Make America Healthy Again Commission, which is led by US health secretary Robert J Kennedy.

The movement is against ultra-processed foods and the commission’s initial mission is to advise and assist the president on how best to exercise his authority to address the childhood chronic disease crisis.

The commission was set up as the use of anti-obesity medication continues to increase.

Anti-obesity

Nick Fereday from RaboBank in the US estimates that up to 12% of adults in the United States, equivalent to 25 to 30 million adults, are on anti-obesity medications.

He said that while some studies have shown that patients of these drugs eat less fresh milk, ice cream and butter, the main negative impact seems to be on snacks and desserts as opposed to dairy.

He said that there are only two drugs on the market now, but there are 70 more in development and he expects the drugs will be available in pill format by 2026.

Grace Binchy from Bord Bia said food companies in the US, such as Nestlé are developing new protein and nutrient dense consumer foods and ready meals for users of these anti-obesity medications.

“Nestlé introduced Vital Pursuits ready meals that are high in protein, have essential nutrients and are portion controlled. The meals target GLP-1 [anti-obesity medication] users, but are also targeted for anyone managing weight.”

Many EU milk processors are under financial pressure as they are paying high prices for milk and need to add value to the products that they make.

European farmers are more mobile in terms of switching milk companies compared to Ireland, where suppliers are tied to a co-op.

If say a French processor is paying a relatively poor price for milk because their product portfolio isn’t delivering for them, they will lose suppliers and be in a worse position.

1. Dairy fats such as butter and cream are going to remain scarce and prices are going to remain high. As a large producer of butter, this is important for Irish milk co-ops

Demand for fats is high and production of fat is going to remain low as US and EU production is moving increasingly towards cheese and higher-value proteins.

2. Anti-obesity medications such as Ozempic, commonly referred to as GLP-1s, are creating an additional demand for protein.

This is because those using anti-obesity medications have a lower appetite but have a much higher requirement for high protein, nutrient-dense foods. Demand for high protein, clean foods is surging globally.

3. According to Grace Binchy from Bord Bia, Danone recently reported a 4.2% volume increase in the last three months of 2024, driven by strong momentum in North America, particularly in high-protein categories, which may be an early indicator of GLP-1s’ impact on the market.