Milk price drops to lowest level in ten years

Things are moving fast in the European dairy market. Within just a few months, milk prices have fallen sharply. Pressure is greatest on the free market for raw milk, with effects felt across the entire chain. For consumers, this translates into lower prices on supermarket shelves. For dairy farmers, the picture looks very different.

Free market under heavy pressure

By mid-December, the DCA Benchmark Price for Raw Milk had dropped to €14.50 per 100 kilos. The lowest level since 2015. This puts particular pressure on the free market for raw milk, where day prices apply and surplus volumes are traded immediately. Other dairy commodities have also become significantly cheaper. Since June, butter prices in 

Northwest Europe have fallen by 45 percent to around €4,000 per metric ton. That level was last seen in the spring of 2021. Cream and Gouda foil cheese are following the same trend and are also under pressure. According to DCA Market Intelligence, supply has increased rapidly in a short period of time. “Production has risen so quickly since the summer that the market is now talking about a ‘milk tsunami,’” says Wouter Baan, dairy and meat analyst at DCA Market Intelligence. Bluetongue disrupted calving patterns, causing the production peak to occur later than usual. At the same time, a strong euro is making European dairy exports more difficult.

Milk price below cost level

This price pressure is now filtering through to payments to dairy farmers. In the Netherlands, the average milk price has fallen by €13 per 100 kilos since September. It now stands below €42.50. That is lower than the average cost price, which in practice exceeds €45 per 100 kilos.  According to Baan, a quick recovery is unlikely. “The global milk surplus is expected to continue putting pressure on prices in the coming months.” The expectation is that milk prices will fall below €40 per 100 kilos in 2026. In Ireland, that level is already visible.

Lower prices in the supermarket

Lower commodity prices are now becoming visible at retail level, despite existing contracts. Price movements are particularly noticeable in Germany. “There is an intense butter price war underway in the German retail market,” Baan says. Packaged butter is being used as a loss leader. The lowest price currently stands at €0.77 for a 250-gram pack. 

Additional pressure builds around the holiday period. Milk processors operate fewer processing days, leading to surplus volumes. These are sold at low prices on the free market for raw milk and cream. This further increases price pressure on basic dairy products.

Dcamarketintelligence.com