EU cow milk deliveries to dairies would follow a similar trend, albeit at a slightly higher rate than total milk production (+1.6 per cent in 2012 and +1.0 per cent in 2013).

The average yield per dairy cow would continue to increase in 2012 to an estimated 6,598 Kg. The continuous increase in milk yields, both in EU15 and in new Member States, would compensate for the contraction in the dairy herd, which is estimated to decline by about one per cent in 2012 and again in 2013.

On the basis of Eurostat data until March 2012, EU deliveries are foreseen to remain 4.7 per cent below the quota level in the year 2011/12 (vs. -5.5 per cent in 2010/11). Supported by the good level of farm gate milk prices in 2011, an over fulfilment of quotas is likely for Cyprus, Germany, Ireland, Austria, the Netherlands and Luxembourg.

Dairy commodities

After a year of high dairy commodity prices in 2011, prices displayed a slight decline over the first five months of 2012 due to increased supplies, both in the EU and at world level. This price trend is expected to influence, among other factors, the processing of milk into dairy commodities.
,br> Growing quantities of milk are expected to be processed into cheese (+1.1 per cent in 2012 and +0.6 per cent in 2013). The larger share of EU cheese production would be consumed domestically, but demand from importing third countries is likely to increase in 2012.

After a rather stable trend in 2011, total fresh dairy production is estimated to show a slightly higher rate of expansion in 2012 (+0.6 per cent). This is explained by a growing production path of drinking milk and even more so for cream. In 2013, production would continue to grow, in view of prospects of sustained world demand and improvement in the general economic environment.

In 2012, Whole Milk Powder (WMP) production is projected to shrink for the second year in a row (-1.1 per cent compared to 2011) and this trend is foreseen to continue in 2013. Despite expecting a more favourable exchange rate, in 2012 the EU WMP exports would continue the declining trend started in 2009, as EU remains less competitive against supplies from Oceania.

Opposite to WMP, Skimmed Milk Powder (SMP) production is expected to increase again in 2012 (+14.5 per cent compared to 2011).

Thanks to the strong world demand, a further expansion could be possible in 2013 (+6.5 per cent). Exports are projected to grow by about 12 per cent this year and seven per cent in 2013, after the even larger increases in the two last years.

China has been gradually becoming an important world player in SMP imports, but a substantial increase in imports from North African countries (Algeria, Egypt) has also taken place. SMP intervention stocks built up in 2009 are expected to be completely emptied by the end of 2012 through the most deprived person's scheme. Total butter/butteroil production is expected to increase again in 2012 (+3.8 per cent) and in 2013 (+0.8 per cent).

Imports are likely to decrease in 2012 and then to stabilise in 2013. The EU was not very competitive on the export market in 2011, given the existing price gap between EU and world price.

Some recovery of EU exports is expected in 2013, but a substantial share of the additional production would have to be absorbed by the domestic market.