European liquid dairy market turns firmer

Liquid dairy prices are recovering from the lows seen at the end of last year. Higher milk collections initially kept availability ample, but seasonal declines, recent heatwaves and stronger product-specific demand are now shifting market conditions.Prices across the liquid complex came under significant pressure in late 2025, as a second peak in milk production increased raw material availability. DCA raw milk benchmarks fell as low as €2.50 per 100 kg, skimmed milk came close to zero and SMC dropped down to €130 per ton in late December. Strong milk availability continued to weigh on the market during the first half of 2026. However, conditions shifted from week 27, as dry weather and heatwaves started to affect milk production. By August 28, DCA raw milk benchmarks had recovered to €44–€48 per 100 kg, up 20.5%–31.5% over the previous month.Downstream liquids also strengthened. Skimmed milk reached €30 per 100 kg, 50% above last year, while SMC increased to €3,045 per ton (+49.6% YoY). SWC remained the strongest year-on-year performer at €1,390 per ton, up 78.2%. The sharp movements underline the volatility of the liquid market, with skimmed milk and SMC recording coefficients of variation of 67.7% and 49.9%, respectively.Higher milk supply expands liquid availability Through June 2026, milk collections remained above last year’s levels, supporting higher availability across the liquid dairy market. German collections increased by 6.5% YoY to 17.3 million tons, while France reached 12.7 million tons (+2.9%). Collections also increased in the Netherlands by 5.8% to 7.3 million tons, Italy by 3.7% to 7.2 million tons and Poland by 3.2% to 7.2 million tons.For the skimmed stream, higher milk collections increase the volumes available for further processing. As liquid skimmed milk has limited transport and storage possibilities, surplus volumes can be concentrated into SMC and further dried into SMP. SMP production therefore provides an indication of how this stream is being absorbed. In H1 2026, output reached 220,000 tons in France (+6.8% YoY) and 218,000 tons in Germany (+15.7%), with stronger growth in Poland (+21.6%) and Ireland (+19.4%).For SWC, availability is instead linked to cheese production, as sweet whey is generated as a by-product of the cheesemaking process. Based on cheese output and estimated milk requirements, cheese-derived liquid whey availability increased by 5.1% YoY to 10.1 million tons in Germany and by 1.3% to 6.8 million tons in France. The Netherlands recorded stronger growth of 6.3% to 3.7 million tons, while Italy remained broadly stable at 4.6 million tons.Overall, raw material availability remained ample, although SMC and SWC supply ultimately depends on processor allocation between liquid and further-processed products.Liquids trade remains concentrated within the EU Trade was mostly intra-EU in 2026, reflecting logistical constraints. As of May, internal raw milk trade increased by 15% YoY to 3.44 million tons, with Germany, Belgium, Czechia and the Netherlands accounting for a large share of volumes. Skimmed milk trade recorded stronger growth, almost doubling to 580,069 tons (+94%), largely driven by France, where shipments increased by 249% to 406,120 tons.Intra-EU trade in SMC increased by 36.2% to 337,951 tons, led by Germany at 121,989 tons (+34.3%), France at 89,777 tons (+42.5%) and the Netherlands at 60,964 tons (+48.2%). SWC trade also rose by 20% to 287,850 tons, with Germany, the Netherlands, Austria and Czechia among the main suppliers.Extra-EU exports were considerably smaller. Raw milk exports increased by 3% to 327,236 tons, while skimmed milk exports rose by 49% to 32,660 tons. In contrast, SMC exports declined by 10.5% to 22,179 tons and SWC by 15% to just 69 tons.European demand varies across liquid products Raw milk flows were concentrated in north-western Europe, led by Germany at 1.28 million tons (+14%) through May 2026, followed by the Netherlands at 494,636 tons and Belgium at 368,226 tons. These countries are also major exporters, reflecting an integrated regional market where milk moves across borders to balance supply and processing needs. Italy remained another important destination at 300,036 tons, while Spanish purchases increased by 85% to 111,225 tons.Skimmed milk showed a stronger geographical link between France and Spain. France was by far the largest supplier, while Spain dominated demand, receiving 370,933 tons (+658%). Italy followed at 70,932 tons, while Germany received 40,261 tons.SMC flows showed a more diversified destination mix. Greece remained the largest market at 77,717 tons (+40.1% YoY), followed by the Netherlands at 62,752 tons. Further east, demand strengthened considerably. Poland more than tripled its purchases to 54,017 tons (+218.4%), alongside a 21.6% increase in domestic SMP production. Lithuania showed a similar development, with SMC purchases rising by 168.6% as SMP production almost doubled in H1 2026 to 12,760 tons. SWC flows were centred on Germany and the Netherlands, which received 123,132 and 76,873 tons respectively. Germany increased its purchases by almost 47%, while Austria also recorded strong growth of 59% to 14,195 tons. Lithuania and Denmark remained other relevant destinations.Conclusion and Discussion The European liquid dairy market has started to tighten as seasonal declines in milk production coincide with heatwaves and a dry summer, despite collections remaining above last year’s levels through H1. Four consecutive heatwaves from May onwards brought temperatures above 40°C across parts of Europe, while persistent drought and declining soil moisture affected key dairy regions in Germany, France and the Benelux. Cooler and wetter weather is now providing some relief, but ECMWF and Copernicus forecasts point to warmer-than-average conditions returning in September.Beyond availability, product-specific demand is adding further support. SWC has recorded the strongest price increase, supported by the broader protein rally, with WPC80 and WPI90 trading at €26,250 and €29,835 per ton amid strong demand and limited liquidity. This may also be encouraging greater movement of SWC between European producers as processors allocate milk components towards higher-value protein applications. SMC also remains relatively high compared with SMP, supported by fresh dairy demand and strong intra-EU trade, particularly towards Greece. Higher liquid prices are also putting pressure on the broader dairy complex, although this has not yet been fully reflected in commodity prices. Current cream and SMC values support firmer butter and SMP prices, while higher raw milk prices add pressure to cheese. However, the transmission is not immediate, but if liquid markets remain tight, the impact could become more pronounced, particularly for cheese and powders, where stocks and forward coverage are more limited.