Milk production in the EU is set to decline by 6.7% by 2035, according to Rabobank dairy analyst Richard Scheper.

Speaking at the Bord Bia dairy markets seminar on Tuesday, Scheper said that north west Europe, including the Netherlands, Germany, Denmark and Belgium, is going to be hit hardest by the downturn in milk supplies.

“When we look at northwest Europe, it is expected that almost all of the milk supply gains since 2010 will be erased and milk supply is likely to fall by over 7m tonnes [7bn litres], with the most significant drop percentage wise concentrated in the Netherlands. We expect a 20% drop in the dairy herd, leading to a 20% drop in milk output,” he said.

He said that the reduced supply is going to have a big impact on dairy companies operating in the region.

“The first impact is the loss in additional revenues, because if there is less milk being processed, there is less dairy products to be sold.

“There will also be higher cost of processing the milk because of poorer utilisation of the processing capacity.

“At the same time the competition for milk increases, so processors will be under pressure to pay higher prices for milk,” he said.

For Ireland, Scheper expects milk output to stay around the same as it is currently.

He said that dairy companies will place greater emphasis on the European, rather than global markets, as they try to add value to dairy products.