Ongoing geopolitical tensions, new trade policies and environmental sustainability concerns are some of the big factors that are driving change within the dairy sector at the moment.
This was according to Dr Eva Gocsik, head of global strategy on animal proteins at Dutch firm, Rabobank.
Dr Gocsik was speaking at Bord Bia’s dairy market seminar this week in the Killashee Hotel in Naas, county Kildare.
Another area that sometimes gets overlooked but is perhaps likely to impact the most change in the dairy sector in coming years according to Dr Gocsik, is the stagnating milk supply being experienced both in the EU, and across the wider world.
Supplies in 2025 were up across Europe on the back of high prices, low concentrate costs and high stock prices but this was an exception rather than the norm.
“After years of growth, EU long term milk supply is now stagnating. From 2019 through to 2026, there has been a growth in supply of just 0.2%” Dr Gocsik said.
This is down to a number of factors, an ageing farming population, the increase in input costs and reduced margins across the continent being the main reasons.
Small family farms on the continent are becoming less viable and as a result the younger generations are moving into other industries to make an easier living. This leaves older generations with no option but to sell or lease out the farm.
Simultaneously, the bigger farms are expanding in order to make up for reduced profit margins per cow as well as breeding animals with higher milk output.
For that reason, milk supply is remaining steady; the supply from those farms being lost from the system is being replaced by the expanding farms with higher outputs per cow.
Processors
What impact does this have on milk processors? Well, according to Dr Gocsik, like is the case on farms, dairy processors too will look to consolidate.
This essentially means processors are more likely to merge with other processors in the coming years.
A merger allows milk processors to increase the supply base giving greater security for the business, a wider product portfolio, easier access to capital and more access to different markets.
This is already starting to happen in Europe and interestingly it’s not just small co-ops looking to merge in order to survive, larger processors are also looking at their options.
One of the more recent deals between two large co-ops was last years merger of DMK, a German co-op with a milk pool of over 5.5 billion litres and Arla, a Denmark based co-op with a milk pool of over 13 billion litres.
This is already starting to happen in Europe and interestingly it’s not just small co-ops looking to merge in order to survive, larger processors are also looking at their options
The merger has made the new entity one of the biggest processors in Europe with greater diversity and market reach.
DMK was already a major processor with a milk pool greater than any of the Irish processors.
Other recent agreements include, the merging of German brand Muller with UK brand Yew Tree Dairy, Belgian processor Milcobel with the Dutch co-op FrieslandCampina and the Irish merger between the Arrabawn and Tipperary co-ops.
Smaller processors
According to Dr Gocsik, smaller milk processors can still compete. They have some advantages over larger co-ops in that they are more agile, they experience less complexity with bureaucracy and more significantly, they have a more direct and deeper connection with their suppliers.
It’s Dr Gocsik’s belief that while the large processors stand a strong chance of success, smaller processors who are good at what they do and manage risk well, will also stand a good chance of succeeding in the future.
It’s the co-ops and processors who get caught between the two stools, who are neither a large or small co-op that will face the most pressures going forward.
It will be interesting to see how this materialises in an Irish context. It’s particularly topical and close to the bone for suppliers and shareholders in both the Aurivo and Dale Farm co-ops, who have attempted to merge in recent weeks.
SHARING OPTIONS