The hardships facing Europe's dairy and hog farmers are to drive the region's feed industry to a third successive year of a decline which is at risk of losing France its position as sector leader.

Output of compound feed by European Union producers will fall by about 1% this year, a decline of roughly 1.5m tonnes, industry group Fefac said.

The decline will be led by "a continuation of difficulties" in the dairy sector which, while enjoying stronger milk prices, is being hampered by relatively high costs and a shake-up of market regulation.

A United Nations report on Thursday said it expected EU milk output to "stagnate" this year as farmers and traders "adapt to the new trade environment" created by separating support payments from production levels, and raising output quotas.

Poultry revival 

Cattle feed production will fall by about 2% this year, with pig feed output showing a 1% decline as farms emerge from a "downward trend in the pig production cycle".

EU pig feed output fell 5% last year, reflecting the sector's hardships in the face of global recession and a firm euro, and following on from a period of soaring feed costs.

However, volumes of poultry feed, which dropped 1% in 2009, will "stabilise" this year, amid a "continued recovery in consumer demand for poultry products".

Europe's poultry output will rise by 0.5% in 2010, Thursday's UN report said.

Lower costs 

While the soft demand will place a strain on feed producers' sales, the industry is likely to enjoy depressed raw material costs, Brussels-based Fefac added.

Hopes of a strong EU cereals crop pointed to "relatively low quotations" for grains while, for soymeal, a fall in prices spurred by record South American soybean crops will offset the impact of a weaker euro, which makes imports more expensive.

Fefac also flagged the emergence of Spain's feed industry as a challenger for the title of EU leader, after recording a relatively small decline in output of 2.6% last year.

Spain was now "shoulder to shoulder" with France, Europe's biggest producer since 1992.