German dairy sector seeks grip on price risk

The deep valley in the European dairy market seems to be behind us. According to representatives from the German sector, the milk price could rise again, although the market situation remains uncertain. At the same time, they point out that dairy farmers should better protect themselves against strong price movements, for example by fixing a part of the milk price. This is stated by dairy farming chairman Karsten Schmal of the German Bauernverband and chairman Detlev Latka of the German dairy organization MIV during the Berliner Milchforum. Latka, who is also the CEO of the cooperative dairy company Hochwald, is cautious with his expectations for the dairy market. The persistently high milk supply makes him hesitant. Geopolitical tensions, such as the war around Iran, also make forecasts difficult. Nevertheless, the world market for dairy seems to be moving in a more positive direction, according to him. Neither of them is calling for reduced milk production. According to Schmal, dairy farmers should actually take into account an increasing demand for dairy products. More milk in 2025Looking back at 2025, both leaders note that German milk production increased by 1.6% last year. Especially in the second half of the year, milk supply clearly increased. Since the autumn of 2025 until now, approximately 6% more milk has been delivered than in the same period a year earlier. Moreover, the supplied milk contained relatively high levels of fat and protein. This increases the amount of processed dairy and thereby intensifies pressure on the processing industry. Despite a significant price drop at the end of the year, the average milk price for the entire year of 2025 remained relatively high. Dairy farmers received an average of €52.00 per 100 kilograms of milk. This is the highest milk price ever after 2022. In the last months of the year, however, the milk price fell below €40.00 per 100 kilograms, with the sharpest decline in northern Germany. According to Schmal, companies that had fixed a part of their milk price in advance performed better during this period. At the same time, he believes it is not obvious at this moment that dairy farmers should again massively fix prices. Structural pressure on the sectorThe sector hopes that the market will recover again. Schmal also expects more support from German politics for dairy farming. According to him, Germany is among the four or five largest milk producers in the world, but many dairy farmers are experiencing economic difficulties. The incomes are on average too low to modernize barns in time or finance new installations. Many barns are outdated, while new construction is expensive and permitting procedures take a long time. According to Schmal, it can take eight years between the application and approval of a permit. The structural pressure on the sector is also visible in the number of businesses. Approximately 2% of dairy farmers stop each year. The dairy herd is also shrinking. In about five to six years, approximately 600,000 dairy cows have disappeared, around 14% of the total.