Falling milk prices: is a crisis looming or is there hope on the horizon?

While the farm gate prices remain consistently under pressure, the DCA benchmarks of raw milk in January failed to rise above a modest level of €20. The European dairy market is still flat at the beginning of 2026. However, there are cautious signs of hope on the horizon. Nonetheless, the patience of dairy farmers is being tested. In some places in the EU, farmers are even taking to the streets again, calling for intervention. The fact that FrieslandCampina's guaranteed price for February fell by just €0.50 to €39 was met with confusion in the market. Based on the current raw material value of milk, a milk price of €35 is much more realistic than one of €40. It is possible that the dairy giant from Amersfoort is trying to establish a bottom in the market, in the interest of its members. 2026 threatens to be a meager year with a milk price far below cost. Farm closures and herd culling From a cooperative, one may expect that it prioritizes the interests of its members, although private processors are also careful with their suppliers. There may be an abundance of milk at the moment, but scarcity will inevitably return in the long term. With the current milk prices, farmers will start culling from the bottom of the dairy herd, as reputable accounting firms also urgently advise. The German Milch Industrie Verband (MIV) expects that more dairy farmers in the country will stop in 2026 due to the rapidly decreased milk price. Each year, an average of 3% to 5% of German dairy farmers stop. Last year, this number was lower because farmers who were considering exiting the sector, encouraged by high milk prices, continued milking for a while longer. Due to the turnaround in the market, the organization expects that there will be more farmers exiting the sector in 2026. It will not be much different in other European countries. Still too much milk For the time being, however, the European milk supply remains high. Too high in light of the market. In Germany and France, the weekly supply figures at the beginning of 2026 were over 5% higher than last year. The fact that the spot milk prices are still hovering around or below €20 at the beginning of February is not without reason. Throughout 2026, after the peak in May, less milk will become available. This is partly seasonal. Additionally, by that time, the effects of the measures dairy farmers are taking to slow down production can also be expected. With a record-low heifer population, there will eventually be less milk in the US, while New Zealand is likely to see a slower decline in supply later this year than the surge in the second half of 2025. Confusing GDTThe recent rise in Global Dairy Trade prices is somewhat confusing. That has been visible since mid-December. The third GDT of 2026 also ended up higher yesterday. Significantly higher, with price increases of over 10% for mozzarella and skimmed milk powder. Other products, including butter, also show significantly higher prices. Are these the first signs of market recovery, or should this be seen as a bounce effect following the implosion in recent months? So far, the effect of the rising GDT in the European dairy trade has been somewhat ignored. The abundant milk supply and the overflowing warehouses of butter make a rapid market recovery unlikely. The higher GDT is no more than a signal that the worst price pressure has come to a halt. For the market to regain momentum, the milk production must first decrease. The persistently strong euro also hinders market recovery. Farmers fear crisis, protests in France Dairy farmers in Belgium believe that the current price crisis is worse than that in 2015. The Walloon farmers' federation Fugea fears that milk prices will drop to €30. This week, the European Commission is being called through the media to bring intervention measures back into play. At the end of 2025, Hungary and several other Eastern European countries made a similar call. European Agriculture Commissioner Christophe Hansen was not opposed to the request then, but wanted to conduct research first on its necessity and usefulness. The last time dairy went into intervention was in 2020. Dairy farmers in the Vosges region of France do not want to wait passively and organized demonstrations in various locations on Thursday, including in front of factories of Lactalis and Savencia. In Ireland, farmers also visited processors at the end of 2025 to express their concerns. But whether this will solve the problem is questionable. Processors are also feeling the pinch. Buyers and customers currently have the upper hand. Additionally, there is still some frustration after a few years of high prices. Scenarios Dairy farmers are likely to have their patience further tested in the coming months. Markets operate cyclically. When production peaks, prices drop and vice versa. Looking ahead, roughly three scenarios are shaping up for the rest of 2026. In the baseline scenario, milk supply remains high until summer, after which seasonal changes and interventions at the business level gradually create some relief. Prices then cautiously recover. In a negative scenario, overproduction continues longer, exports remain sluggish due to a strong euro, and pressure on milk prices continues. In a more positive scenario, supply decreases faster than expected, for example through accelerated culling, allowing the market to truly turn around. For now, however, there is no clear impetus to accelerate that process.