Falling milk prices: looming crisis or hope?

FrieslandCampina's guaranteed price for February fell to just €0,50, falling to €39, wasn't widely understood by everyone in the market. Based on the current raw material value of milk, a milk price of €35 is much more realistic than one of almost €40. The Amersfoort-based dairy giant may be trying to set a floor in the market, in the interest of its members. 2026 threatens to be a meager year, with a milk price well below cost.

Stopping and cutting livestock numbers
You might expect a cooperative to prioritize its members' interests, although private processors are also careful with their suppliers. While there may be an abundance of milk right now, a shortage will inevitably occur in the long run. With current milk prices, farmers will naturally cut back on the lower end of their dairy herds, as reputable accounting firms strongly recommend. Furthermore, given current milk prices, there may be considerable interest from the dairy farming sector to participate in the Voluntary Termination Scheme for Livestock Farming Locations (Vbr).

The German Milch Industrie Verband (MIV) expects more dairy farmers in the country to quit in 2026 due to the rapidly declining milk price. An average of 3% to 5% of German dairy farmers quit each year. Last year, there were fewer because potential quitters, encouraged by high milk prices, continued milking for a while. Due to the market turnaround, the organization expects an increase in quitting in 2026. This trend is not expected to be much different in other European countries.

Still a lot of milk
For now, however, European milk supply remains high. Too high in light of the market. In Germany and France, weekly supply figures at the beginning of 2026 were more than 5% above last year's level. The fact that spot milk prices are still hovering at or below €20 in early February is, of course, not without reason. Over the course of 2026, after the peak in May, less milk will be available.

First of all, it's seasonal. You can also expect the effects of the measures dairy farmers are taking to curb production to be felt around then. With a record-low heifer herd, the US will also sooner or later produce less milk, while New Zealand is likely to see a slower decline in supply later this year than the increase in the second half of 2025.

Confusing GDT
The rise in the Global Dairy Trade observed since mid-December is somewhat confusing. The third GDT of 2026 also ended yesterday higher. Significantly higher, in fact, with price increases of over 10% for mozzarella and skimmed milk powder. Other manufactured goods, including butter, are also trading significantly higher.

Are these the first signs of a market recovery, or should this be seen as a bounce after the implosion of the past few months? Until now, the effect of the rising GDT (Value Added Tax) on the European dairy trade has been largely ignored. The ample milk supply and overflowing warehouses with butter make a rapid market recovery unlikely. The higher GDT is nothing more than a signal that the worst price pressure has subsided. For the market to regain some breathing room, milk production will first have to decline. The persistently strong euro is also hindering market recovery. 

Farmers fear crisis, protest in France
Dairy farmers in Belgium believe the current price crisis will be worse than the one in 2015. The Walloon farmers' federation Fugea fears the milk price will drop to €30. The European Commission is being called upon this week in the media to revive intervention measures. Hungary and several other Eastern European countries made a similar call at the end of 2025. European Commissioner for Agriculture Christophe Hansen did not oppose the request at the time, but first wants to investigate its usefulness and necessity. The last time dairy intervention was implemented was in 2020.

French dairy farmers in the Vosges Mountains refuse to sit idly by and organized demonstrations in various locations on Thursday, including in front of Lactalis and Savencia factories. In Ireland, farmers also visited processors at the end of 2025 to express their concerns. But whether this will solve the problem remains to be seen. Processors are also in dire straits. Buyers and buyers are currently having the upper hand. Moreover, after several years of high prices, there is still some frustration.

Scenarios
Dairy farmers' patience will likely be further tested in the coming months. Markets are cyclical. When production peaks, prices fall, and vice versa. Looking ahead, three broad scenarios emerge for the remainder of 2026. In the baseline scenario, milk supply remains high until the summer, after which, seasonally and through farm-level interventions, there will be gradual relief. Prices will then recover cautiously. In a negative scenario, overproduction persists longer, exports remain sluggish due to a strong euro, and milk price pressure continues.

In a more positive scenario, supply declines faster than expected, for example, due to an accelerated shutdown that allows the market to actually operate. However, a clear impetus to accelerate this process is currently lacking.