Milk producers across the European Union (EU) are facing increasing financial pressure as farmgate milk prices decline sharply despite higher milk production, expanding dairy processing activity and growing international exports. According to European Commission market data reported by Agriland, average milk prices received by EU farmers fell by almost 20% compared with the corresponding period in 2025, highlighting the growing imbalance between milk supply, market demand and producer profitability.
The annual decline affected almost every EU member state. Hungary recorded the steepest reduction at 29%, followed by Czechia and Lithuania, where prices declined by 26% each. Slovakia experienced a 25% fall, while Germany and the Netherlands both registered reductions of 24%. Cyprus was the only EU member state to report an increase in farmgate milk prices during the period.
The decline comes at a time when milk collection volumes and the production of major dairy commodities are increasing across the bloc. Higher milk availability has encouraged processors to expand manufacturing operations, particularly in categories intended for domestic consumption and international markets.
Rising Dairy Processing and Changing Commodity Prices
Organic milk accounted for 3.2% of total EU milk collections in August, reflecting the continued presence of organic dairy production within the European milk supply chain. Austria recorded a considerably higher share, with organic milk representing 16.5% of its collections. Denmark and Sweden also exceeded the EU average, registering 9.7% and 9.5%, respectively.
Meanwhile, dairy commodity markets experienced contrasting price movements. Butter prices declined by 3.8% year-on-year, while skimmed milk powder (SMP) prices increased substantially by 54.6%. Whey powder also recorded a significant annual price increase of 52.3%.
These differences reflect changing market conditions and the growing importance of product diversification within the dairy processing industry. With domestic consumption patterns shifting and demand varying across commodity categories, processors have been adjusting production schedules and directing available milk towards drying facilities and products with longer storage potential.
The increased production of milk powders and dairy ingredients also provides processors with greater flexibility in managing seasonal milk surpluses and responding to international purchasing requirements.
International Dairy Exports Register Strong Growth
Despite declining farmgate milk prices, EU dairy exports to markets outside the bloc recorded growth across several major product categories. Butteroil exports increased by 40%, while butter shipments rose by 38% compared with the previous year. Skimmed milk powder exports expanded by 14%, and cheese exports registered a 6% increase.
Whey powder was the exception, with export volumes declining by 4%, despite its considerable annual price appreciation.
Growing demand from China, the United States and the United Kingdom contributed to the expansion of EU dairy exports. Buyers across Southeast Asia and the Middle East also supported international trade, creating additional opportunities for European dairy processors.
The growth in exports demonstrates the continued competitiveness of EU dairy products in international markets. However, stronger overseas sales have not translated into higher returns for milk producers, highlighting the difference between export performance and the prices received at farm level.
Rising Farm Production Costs Add Pressure on Dairy Farmers
While dairy processors benefit from increased production and expanding export opportunities, farmers continue to face considerable operational expenses. Labour, environmental compliance and animal health costs remain elevated, placing additional pressure on dairy farm profitability. Although feed and energy prices have stabilised following earlier increases, overall production expenses continue to affect producer margins.
The article identifies farmgate milk prices below €0.43 per kilogram in major milk-producing regions as a level at which producer margins can narrow rapidly. This situation creates challenges for farmers attempting to maintain efficient operations while meeting increasingly demanding environmental and animal welfare requirements.
Lower milk prices combined with persistent operating costs may also delay investment in herd modernisation, farm infrastructure, improved production technologies and sustainability initiatives.
The current EU dairy market situation highlights a growing challenge for the entire dairy value chain: balancing expanding milk supplies and international trade opportunities with the financial sustainability of primary producers. For the European dairy industry, maintaining profitable farm operations will remain essential to ensuring long-term milk supply stability, processing efficiency and competitiveness in global dairy markets.
