Dutch raw milk prices rebalance as milk production decelerates

Dutch raw milk benchmarks have recovered sharply in recent weeks as milk production growth moderates and lower summer milk collections reduce surplus milk availability in the spot market. Despite the rebound, the market remains well below last year's levels, reflecting an improved market balance rather than a tighter milk supply. At the same time, additional Dutch milk continues to be absorbed primarily through regional bulk trade.1. Benchmark overviewDCA raw milk benchmarks in the Netherlands reached €40 per 100 kilo in the first week of July, reflecting a strong recovery of 105% compared with the previous month. However, benchmarks remain 24.5% below the previous year, indicating that the recent increase follows an extended period of market weakness.Throughout 2025, spot milk prices remained broadly stable until September, with benchmarks declining sharply and reaching their lowest levels in January 2026. Prices then fluctuated at low levels until May, when they started to recover. These movements resulted in elevated market volatility, with a coefficient of 0.49.Spot milk benchmarks remained substantially lower than FrieslandCampina’s (FC) guarantee price throughout the previous year. While the FC’s price averaged €41.25 per 100 kilo in July, declining by only 0.6% compared with the previous month and 27.3% year over year, spot prices remain considerably more volatile. The persistent gap between the two price series underscores the abundant milk availability in the spot market during much of the period.That said, the rapid recovery in DCA benchmarks has narrowed this difference considerably, with the gap closing from -74.1% to -3% between April and the second week of July. This suggests that market conditions are becoming more balanced as milk availability eases heading into the summer months.2. Milk supply pressure eased as summer approachedMilk production in the Netherlands has remained above the previous year's levels throughout the current season, resulting in a positive milk availability during most of the period. The Dutch milk output increased by 3.6% over the previous year to 1.25 million tons in May, extending a growth trend since July 2025. Although production continued expanding, growth moderated from earlier increases, such as 7.9% in October 2025 and 6.2% in March. The sustained increase in milk availability pressured the spot market notably, where DCA benchmarks remain consistently below FrieslandCampina's guarantee price throughout 2025 and the first half of 2026.The widening gap between the two indicates that milk availability is outpacing the immediate processing demand of the dairy industry, with larger volumes being traded on the spot market. The widest point was reached in January, when DCA benchmarks traded approximately 71% below the guarantee price, although market conditions appear to gradually tighten.Increasing benchmark prices have coincided with slower production growth and industry reports of lower milk collections during the June heatwave, with processors indicating weekly declines ranging between 5% and 10%. Although the full production impact remains uncertain, this appears to have supported a rapid recovery in benchmark prices. Hence, the gap with FC’s price narrowed to 3% by the second week of July, suggesting that surplus milk availability is easing as the market moves into the summer period. Rather than a shortage of milk, the recent price recovery indicates a more balanced relationship between available spot volumes and processor demand in the short term.3. Regional bulk trade expanded amid the surplusThe increase in Dutch milk production is mostly directed to the regional trade rather than international exports. Given its perishability and high transport costs, raw milk is generally traded over relatively short distances, making the internal EU market considerably more relevant than extra-EU destinations. As of March, the Netherlands provided 198,185 tons of raw milk to other EU member states, representing an annual increase of 42.2%. This expansion concentrated primarily in the bulk segment, where internal exports rose by 44.7%, while retail-packaged milk trade declined by 18.2% to 1,999 tons. Although Dutch imports also increased by 23.2% to 132,740 tons, the country remained a net exporter within the regional market.Belgium received most of the additional Dutch milk, with imports from the Netherlands increasing by 62% compared with the previous year, equivalent to an additional 65,741 tons, most of the milk traded in bulk.In contrast, international exports remained comparatively limited, declining by 9.2% to 3,594 tons as of April. Retail shipments fall sharply following weaker demand from China, while bulk exports record moderate growth from a relatively small base. The contrasting performance between retail and bulk trade suggests that additional Dutch milk is increasingly directed toward industrial processing rather than consumer markets. This development is particularly notable as milk production has declined in neighboring countries such as Germany and France, reinforcing the importance of cross-border bulk trade in balancing regional milk availability.4. Milk allocation evolved unevenlyDespite the increase in milk availability, processors did not expand production uniformly across all dairy categories. As of April, the estimated allocation of milk into four major manufactured dairy products and drinking milk increased by 1% year over year to 3.68 million tons in liquid milk equivalent. Most of this growth is concentrated in cheese production, which rose by 2.6%, and whole milk powder, which expanded by 8.4%. In contrast, skim milk powder (SMP) production contracted sharply by 15.4%, and condensed milk recorded a marginal decline of 0.5%.Two notable developments were also recorded. Despite the notable contraction in SMP production, butter production increased by 6.7% in the same period. At the same time, milk production increased by 1.6%, outpacing the overall utilization in the dairy industry. This contrasts with developments in neighboring markets, where drinking milk production continues to decline, falling by 3% in Germany and 1.9% in France. Together with the contraction of the trade of retail-oriented milk, this could imply a temporary increase in domestic consumption, although it contrasts with long-term trends of declining drinking milk consumption in the region.All in all, allocation decisions reflect relative profitability across production streams for processors. Currently, the valorization continues favoring the SMP and butter production stream, although the cheese production stream receives additional revenue from the whey segment as well.6. Market mechanisms and interactionsThe Dutch raw milk market observed that spot milk prices respond strongly to changes in surplus milk availability, more than to total milk production. Milk output has remained above the previous year's levels, resulting in ample milk availability for processors and pressuring milk prices on the spot market. This is reflected in the persistent weakness of DCA raw milk benchmarks compared with FC's guarantee price, suggesting that the availability of milk was outpacing processors’ demand. In that sense, a large volume of milk was traded through the spot market, which fostered a decline in benchmark prices despite relatively stable farmgate prices.The additional milk is subsequently absorbed through two alternatives. Firstly, regional bulk trade expands considerably, allowing surplus milk to move toward neighbouring markets where processing capacity or demand is available. Secondly, processors adjusted milk allocation across different manufacturing streams, prioritizing cheese and WMP. Up to a certain extent, this flexibility allowed the industry to address the higher milk availability while responding to changing market conditions and product demand.More recently, market conditions have started to show signs of rebalancing. Milk production growth moderates, while lower milk collections associated with the June heatwave appear to reduce the availability of spot milk. Although overall milk supply remains above last year's levels in May, the reduction in surplus volumes is sufficient to support a rapid recovery in benchmark prices and a significant narrowing of the gap with FC's prices. These developments do not indicate a shortage of milk, but rather that the Dutch raw milk market is reaching a more balanced relationship between available spot volumes and processors' short-term procurement needs.6. Implications for stakeholdersAlthough spot milk prices have recovered considerably in the last weeks, milk production remained above the previous year's levels in May, and regional trade absorbed a significant share of surplus volumes. As such, the benchmark recovery indicates a normalization of market conditions and not a tighter milk market.For processors and traders, weather conditions and seasonal milk collections will continue to play an important role in determining short-term spot milk availability. Given the relatively small size of the spot market compared with contracted milk volumes, even modest changes in surplus milk can result in pronounced benchmark movements. Thus, keeping track of the relationship between spot benchmarks and guarantee prices could give a sense of the short-term market balance and procurement conditions in the Dutch dairy sector.7. Methodological considerationsThis analysis is based on DCA Market Intelligence raw milk NL benchmarks, compiled under established PRA methodologies. DCA benchmarks reflect independently assessed price levels derived from verified market inputs.Trade data was compiled from the Comext database, isolating the HS6 and CN8 codes to the products with an adequate content of fat. Products packaged under 2 kilo were assumed to be directed to the retail sector, while larger packages were assumed to be in bulk and directed to the food industry.The DCA Market Report provides context and understanding to benchmark movements. It is not a forecast, nor a trading recommendation, nor a full market study. Access DCA Market Intelligence’s platform for continuous benchmark monitoring, historical price series, and additional market indicators.8. Additional referencesComext database – Trade information ZuivelNL – Dairy production in the Netherlands