Does the decline in milk prices reverse the high beef prices?

On the beef market, optimism is hard to find. Purchase prices remain high, while the demand for meat is decreasing. However, there is one factor that could potentially provide relief. On the cattle market, optimism is gradually fading. Cattle remains very expensive. So far, slaughterhouses and processors have generally managed to obtain a sufficient premium for the meat to compensate for the higher purchase prices. That is starting to shift. The demand for meat has decreased in recent weeks. This is normal for October, given the weather is not favorable and the holidays are still far away. Nonetheless, insiders in the market indicate that something has changed: the demand is even lower than expected. This applies to both sales within Europe and to exports, partly due to the strong euro. Data from the European Union shows that the movements of cattle prices in Europe vary significantly. In the Netherlands and Germany, the price of O-quality cows is slightly declining to stable. Meanwhile, the price in Poland is decreasing more sharply, while the Danish price is rising slightly. A greater increase is visible in Ireland, where there is a correction on the decline of recent weeks and prices are rising again. More dairy cows expected However, there seems to be potential relief in supply on the horizon. The expectation is that the supply of dairy cattle will increase in the short term if milk prices drop sharply. This will increase the supply at the lower end of the market, particularly of cattle in the O category, the P category, and so-called cull cows. Although more premium parts, such as steak cuts from these cows, are also being sold, the extra supply mainly results in more trimmings. This could lead to lower production costs for minced meat and sausage products in the near future. This could especially provide relief, as the high price of beef has previously led to strong demand for minced meat and sausage, with a relatively high valuation of trimmings within the carcass as a result. A lower raw material price could therefore have a positive impact on price development. Combined with a lower purchase price for dairy cattle, this could improve margins. Milk prices lead to higher supply The main reason for the extra supply is the falling milk price. This is reflected in the DCA Base Milk Price Index. Due to the strong price of milk fat, for example for the production of butter and cheese, as a result of the significant decline in milk production in 2024 and early 2025, the basic level of milk prices this summer was at an atypically high level of €55.62. Because of this high price, it is not attractive for dairy farmers to slaughter less productive animals. Instead, they are keeping their cattle as long as possible to benefit from the high price level. However, the dynamics have now changed. Milk prices are under pressure due to significant production increases in the summer and a sharp decline in the price of milk fat. This is reflected in the prices of butter and cream. Since the peak this summer, the DCA cream price has fallen by 31%. Meanwhile, the price of Gouda has decreased by 29.8% since the peak. This development has caused the average base price paid to dairy farmers to decrease by 6.7% in October compared to the summer. The expectation is that this decline will continue for the time being, as payment prices typically lag behind industrial prices. This is already visible in the DCA spot milk quotation, which has dropped by 33.3% in just six weeks. This indicates a significant decrease in the demand for extra milk and points to a very lenient market. Slaughter numbers decrease slightly again For weeks, it has been heard in the market that the supply of slaughter cattle from dairy farming is increasing. This is also supported by data for the Netherlands. Since week 35, the number of slaughterings has clearly risen, and in recent weeks, the slaughter number has increased to over 11,000 cattle. Since week 37, the number of slaughterings has returned to approximately last year's levels, although it should be noted that the upward trend has not continued. In week 40, the number of slaughterings decreased again to 10,758, whereas a further increase had been expected based on the level of 2024. Consequently, the number of slaughterings is 10.8% lower than last year's level. The expectation in the market is that the peak observed last year in week 40 will occur later this year.