EU dairy production is projected to fall 0.2% in 2025 as Brussels abandons its Farm to Fork policy for a new Vision emphasizing economic sustainability. Cheese production increases despite milk shortages, while farmers demand less regulation and better margins.

EXECUTIVE SUMMARY

European milk production is forecast to decline 0.2% in 2025 to 149.4 million metric tonnes as cow numbers continue falling and economic pressures mount. Responding to widespread farmer protests, the European Commission has replaced its Farm to Fork strategy with a new “Vision for Agriculture and Food” that shifts from environmental emphasis toward economic sustainability, resilience, and simplification. Despite milk constraints, processors continue prioritizing cheese production (forecast to increase by 0.6% to 10.8 million metric tonnes in 2025) at the expense of butter, non-fat dry milk, and whole milk powder. This strategic product allocation reflects strong cheese export growth but raises questions about optimizing returns from limited milk supplies as the industry navigates continuing structural challenges.

KEY TAKEAWAYS

• EU milk deliveries are forecast to decline 0.2% in 2025 to 149.4 million metric tonnes as farmer margins remain tight and environmental regulations continue to impact production.
• Despite milk constraints, cheese production will increase by 0.6% to 10.8 million metric tonnes in 2025, while butter production will fall by 1% to 2.1 million metric tonnes.
• The European Commission’s “Vision for Agriculture and Food” replaces the Farm to Fork strategy, shifting from “stick to carrot” and “green to lean” and emphasizing economic sustainability.
• Fluid milk consumption is projected to decrease by 0.3% to 23.5 million metric tonnes in 2025, reflecting changing consumer preferences
• Technology adoption, including IoT collars and AI milk analyzers, offers 5-12% efficiency gains, helping offset declining cow numbers.

Tractors lined Brussels streets in what has become a familiar scene across Europe. Farmers demanded change as milk production continued its downward slide beneath the weight of environmental regulations and economic pressures. As milk output across the EU fell below historic thresholds, European policymakers responded with a fresh approach to agricultural policy that could reshape the continent’s dairy landscape for generations.

Production Decline Accelerates as Cow Numbers Fall

For the first time in modern record-keeping, the European Union’s dairy cow population has dropped below 20 million animals, reaching just 19.7 million head at the beginning of 2024. This continuing decline in cow numbers has directly impacted milk production volumes across the continent.

*Calculated based on percentage change **Precise figure unavailable but confirmed below 20 million threshold

Sources: AHDB (March 2024)

According to the USDA GAIN report, EU milk deliveries are forecast to amount to 149.4 million metric tonnes in 2025, 0.2% below the revised 2024 estimate. This decline represents a concerning continuation of production challenges rather than a temporary dip.

Source: USDA Foreign Agricultural Service, February 2025

The production challenges stem from multiple factors: dropping cow numbers, persistently tight dairy farmer margins, environmental regulations, and disease outbreaks among major producers. Low farmer margins combined with environmental restrictions continue to push smaller farmers out of production, resulting in declining cow numbers that won’t be fully compensated by increased productivity.

While early 2024 saw a temporary reversal, with milk deliveries increasing compared to the same period in 2023, this brief resurgence appears unsustainable. The forecast for marginally lower cows’ milk deliveries in 2025, at 145.3 million metric tonnes, indicates structural rather than cyclical challenges.

Regulatory Pressure and Market Challenges Drive Production Decisions

The primary factors behind Europe’s milk production challenges form a complex web of regulatory, economic, and demographic pressures. The European Green Deal, approved in 2020, established policy initiatives designed to help the trading bloc reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. These environmental regulations have directly impacted dairy operations across multiple countries.

Many industry observers fail to recognize that these environmental pressures aren’t simply regulatory hurdles to overcome—they’re reshaping the fundamental economics of milk production across the continent. With agriculture responsible for 12% of the EU’s total greenhouse gas emissions and a key driver of biodiversity loss, getting farmers on board with climate initiatives remains vital for achieving green goals. However, the approach taken thus far has created significant friction.

Economic pressures have compounded regulatory challenges. According to industry analyses, milk production profitability has been sliding since early 2023, with falling farm-gate milk prices co-occurring with elevated production costs for energy, fertilizers, and labor. The double whammy of the COVID pandemic followed immediately by Russia’s invasion of Ukraine has left farmers squeezed between rising costs and falling prices.

Farmers Respond with Continent-Wide Protests

The combined impact of regulatory requirements and economic pressures has fueled widespread European farmer demonstrations. In early 2024, German farmers took to the streets of Berlin to protest rising taxes and insufficient subsidies. Similar demonstrations occurred in France, where farmers blocked roads around Paris to demand action on low farmgate prices, green regulation, and free-trade policies.

Escalating tensions drove EU farmers to the streets in protest at the beginning of 2024, and while tensions have temporarily calmed, they continue simmering below the surface. What distinguishes these protests from previous agricultural demonstrations is their unprecedented scale and explicit targeting of environmental policies previously considered untouchable in European political discourse.

Brussels Responds with Bold New Agricultural Vision

In response to mounting farmer concerns and widespread protests, the European Commission unveiled its “Vision for Agriculture and Food” on February 19, 2025. This comprehensive policy document represents a significant shift away from the previous Farm to Fork strategy and toward a more balanced approach that acknowledges economic realities alongside environmental objectives.

The Vision is oriented around four fundamental priority areas that directly address the dairy sector’s challenges:

1. Creating an agrifood sector that is “attractive and predictable” with incomes that enable farmers to thrive
2. Making the industry “competitive and resilient” in the face of rising global competition and shocks
3. Developing a “future-proof” system functioning within planetary boundaries
4. Valuing “food, fair working, and living conditions” and “vibrant, well-connected rural areas.”

This policy evolution marks a significant departure from previous approaches. Rather than primarily emphasizing environmental sustainability, the new Vision strongly emphasizes economic viability, resilience, security, simplification, and competitiveness. This shift represents potential relief for dairy producers wrestling with tight margins and regulatory burdens.

Perhaps most significantly, the Vision signals a fundamental change in regulatory philosophy—from “stick to carrot” and from “green to lean.” This means the following Common Agricultural Policy is likely to be incentives-based rather than prescriptive, with subsidies redirected toward farmers who “need it most,” particularly young farmers and smaller family farms. In the coming months, a new bureaucracy simplification package will cut the red tape that has frustrated producers.

Strategic Product Mix Adapts to Milk Constraints

European dairy processors are making strategic decisions about product allocation in response to declining milk availability. Despite the reduced milk supply, EU cheese production is forecast to reach 10.8 million metric tonnes in 2025, representing a 0.6% increase from 2024. However, this continued focus on cheese production raises questions about whether the strategy optimally serves European dairy’s long-term interests.

The prioritization of cheese production comes directly from other dairy products’ expenses. Butter production is forecast to decrease by 1% to 2.1 million metric tonnes in 2025, while non-fat dry milk is expected to fall by 4% and whole milk powder by 5%. These reductions reflect processors’ careful calculations about maximizing returns from constrained milk supplies but risk ceding ground in global markets for these commodities to competitors.

The industry’s cheese-centric strategy appears justified by market performance. After three consecutive years of declining cheese exports, EU exports rose by 3.6% in 2023 and are forecast to expand by a further 0.4% to reach 1.4 million metric tonnes in 2025. This growth suggests cheese production remains the most profitable allocation of scarce milk resources, though progressive producers might question whether emerging specialty categories could yield even more substantial returns.

Fluid Milk Consumption Continues to Decline

As consumer preferences evolve, fluid milk consumption across the EU continues to trend downward. Domestic consumption will fall by 0.3% to 23.5 million metric tonnes in 2025. This decline reflects shifting consumer habits, with plant-based alternatives capturing increasing market share.

The drop in fluid milk consumption partially offsets the pressures from reduced production, allowing processors to maintain focus on value-added products like cheese. However, this shift also signals a long-term structural change in the EU dairy market that producers must navigate through diversification and innovation.

Generational Challenges and Farm Consolidation Reshape Sector

Beyond immediate production concerns, the European dairy sector faces significant structural transformation through demographic shifts and consolidation pressures. The problem of generational renewal has become particularly acute, with many young potential farmers choosing alternative careers due to dairy’s demanding workload and uncertain economic prospects.

Small and medium-sized operations are increasingly exiting the industry, with Dutch dairy cooperatives reporting losing 14% of members since 2023. As consolidation accelerates, average herd sizes have grown significantly, reaching 85 cows in some regions (up from 62 in 2020).

The Commission’s commitment to presenting a Generational Renewal Strategy in 2025 acknowledges this challenge, but whether policy interventions can overcome the fundamental lifestyle and economic barriers remains questionable. Forward-thinking producers recognize that attracting new entrants requires financial incentives and essential changes to how dairy farming operates, including embracing automation, flexible labor arrangements, and alternative business models.

Technology Adoption Offers Efficiency Gains

As production pressures mount, European dairy farmers increasingly turn to technological solutions to improve efficiency and offset declining cow numbers. IoT collar systems for health monitoring have shown yield increases of 5-7%, while AI milk analyzers are helping German cooperatives reduce waste by 12%.

Innovative feed solutions, including algae-based supplements, are showing promise in reducing methane emissions by up to 15% without negatively impacting yield. These technological approaches offer a path to maintaining production levels despite environmental constraints, though implementation costs remain a barrier for smaller operations.

Outlook: Bold Adaptation Required Amid Continuing Constraints

Looking ahead, the European dairy sector must navigate continuing milk supply constraints amid evolving policy frameworks. While the new Vision for Agriculture and Food represents a potential shift toward more producer-friendly policies, implementation will determine whether it delivers meaningful change or repackages existing approaches.

Progressive dairy operations recognize that waiting for policy solutions isn’t sufficient. The most successful European dairy businesses are proactively adapting through diversification, technology adoption, and strategic partnerships. Whether focusing on high-value specialty products like lactose-free cheese (sales surged 18% in 2024), integrating renewable energy production, or developing direct-to-consumer channels, these operations create resilience regardless of policy developments.

For European dairy farmers, the path forward involves adapting to environmental requirements, seeking efficiency gains, and exploring the alternative income streams highlighted in the Commission’s new vision. The coming year will be critical in determining whether the policy shifts announced in Brussels translate into meaningful on-farm improvements that can stabilize the continent’s dairy production capacity.

LEARN MORE

• European Dairy Farmers Navigate New Environmental Regulations While Maintaining Production
• Cheese Export Markets: Where European Processors Are Finding Growth Despite Production Constraints
• Next Generation Farming: EU Strategies to Attract Young People to Dairy Production

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