FrieslandCampina has thrown a stone into the milk pond by substantially raising the Guaranteed Price for April. In light of the market, an increase was not unlikely, but virtually no one was anticipating such a large step. Read more about the development of milk prices and the dairy market.
After the Guaranteed Price found a bottom in March following a historically rapid decline, the upward trend deployed again. After three months with a three at the top, there is a four for the Guaranteed Price again in April. The turnaround is coming faster than previously thought.
The dairy market offers room for higher milk prices. Based on the valorization of skimmed milk powder and butter, the commodity value of milk had risen to €45 per 100 kilos by mid-March, according to data from DCA Market Intelligence. Cheese and whey yield at least as good returns. However, in the second half of 2025, payout prices were above the commodity value.
Factories often take longer to pass on a turnaround in the milk price after a period of negative margins. However, FrieslandCampina is wasting no time regarding the recovery of the dairy market and is immediately and substantially increasing the Guaranteed Price. In doing so, the company is implicitly putting pressure on the reference companies on which the Guaranteed Price is based.
In February, the top management of FrieslandCampina stated with the annual figures also indicated that milk prices might not improve until the second half of 2026. Less than a month and a half later, that assessment appears to be too cautious. The dairy market has gained ground in a short time.
Powder market sets the tone
Butter and cheese prices have risen towards Easter, despite a persistently high milk supply. Cheese is benefiting from strong sales, causing stocks to tighten. But the real support is coming from an unexpected quarter. Unlike previous rallies, it is not milk fat but protein that is driving the sentiment. The price of whey powder has risen by 35% since the turn of the year to €1.500 per ton. This is the highest level since 2022. Skimmed milk powder has also climbed to its highest level in over three years. Moreover, high prices are being paid for high-quality WPCs, driven by strong consumer demand.
The causes of the resurgence in the powder market are diffuse. Due to the cereulide scandal A large amount of milk powder was destroyed in baby food earlier this year. However, demand continues, requiring additional product. The war in Iran is creating upward momentum, as skimmed milk powder historically benefits from higher oil prices. In the region, food, including milk powder, is being hoarded by consumers.
At the same time, European milk powder mills are operating at full capacity due to high milk supply. Processing capacity cannot fully handle the supply, partly due to factory closures in previous years. As a result, prices for skimmed milk concentrate on the spot market are under pressure. The same applies to spot milk prices.
Spot milk in the gutter
At €13 per 100 kilos, spot milk prices fit three times into the payout prices, while the seasonal peak is yet to come. Moreover, processing days will be cancelled in the coming weeks due to Easter and other holidays, which could potentially widen the gap further.
A plentiful milk supply currently poses no obstacle to positive market sentiment and higher prices. With the substantial increase in the Guaranteed Price, FrieslandCampina provides no incentive to limit milk production. Apparently, there is confidence in the coming months, although the dairy market remains volatile. Whether other processors will also implement substantial increases remains to be seen.
Uncertainty remains
The question is how the dairy market will develop in the coming months. Will the positive sentiment in the powder market hold up amidst geopolitical tensions? And how will butter and cheese prices react to the seasonal peak in milk in Europe, when Ireland also resumes production for export?
In 2022 and 2024, the milk price also picked up in the spring, only to rise sharply afterwards. It is not a given that this will happen again in 2026. The market is surrounded by too many uncertainties for that. The ample milk supply could also put pressure on the market again at a later stage.