Raw milk production across the European Union could decline by 2% in the fourth quarter of 2026 compared with the same period last year, as feed shortages, summer droughts and rising production costs put pressure on dairy farmers. According to Rabobank’s forecast, these challenges could slow milk output recovery and influence farmgate prices across the European dairy market.
Although EU farmgate milk prices have started to recover gradually, the increases remain insufficient to compensate for higher feed and other farm operating costs. Producers are therefore facing continued pressure on profitability as they prepare for the final months of the year.
EU Farmgate Milk Prices Recover Gradually
Preliminary European Commission data show that the average EU farmgate milk price reached 43.11 euro cents per kilogram in September 2026, an increase of 0.84% compared with August. Despite the monthly improvement, prices remained 19.24% below their level in September 2025.
Price increases were recorded in 12 EU member states during September. Belgium registered the strongest increase among the highlighted markets, at 11.7%. Lithuania followed with a rise of 5.12%, while Austria recorded a 3.96% increase and the Netherlands saw prices climb by 3.53%.
The gradual recovery suggests that milk prices are responding to changing market conditions. However, the substantial year-on-year decline means many producers may still struggle to cover rising costs, particularly where feed availability has deteriorated.
Drought and Heatwaves Tighten Feed Supplies
Unfavourable weather conditions during the summer have damaged pastures and reduced forage crop yields in parts of Europe. The resulting shortage of high-quality feed is creating additional challenges for dairy farms as they seek to maintain milk yields and animal health.
Feed costs are also increasing. According to International Farm Comparison Network (IFCN) estimates cited in the report, feed prices rose by 9.2% over the previous month to approximately $283 per tonne. Futures quotations for the European market reached around $350 per tonne.
Higher energy and fertilizer prices are adding further pressure to production expenses. These combined factors are squeezing farm margins at a time when milk prices remain significantly below year-earlier levels.
Feed availability is particularly important because dairy cows require consistent, nutritionally balanced rations to maintain health and production. When forage supplies become limited or more expensive, farms may need to purchase additional feed, adjust rations or reconsider herd management decisions.
Dairy Farmers May Adjust Feeding and Herd Strategies
Experts expect rising feeding costs to remain a major factor affecting dairy farm profitability over the next three to six months. Farms facing shortages of suitable forage may increase their use of concentrates, reformulate feed rations or retain only their most productive cows.
Such measures could help manage costs, but they may also affect milk production. Changes in feed quality, ration composition and herd size can limit the speed at which yields recover, potentially contributing to tighter milk supplies.
If production declines while demand remains firm, reduced availability could provide support for farmgate milk prices. However, the extent of any recovery will depend on weather conditions, feed costs, milk demand and developments in individual member states.
Ukrainian Dairy Exporters Could Find New Opportunities
Lower EU milk output and elevated production costs could create opportunities for Ukrainian dairy exporters, particularly in butter and skimmed milk powder. Ukraine’s raw milk prices remain below the EU average, potentially offering a cost advantage for processors.
In September 2026, the average price of extra-grade raw milk in Ukraine was reported at 33.93 euro cents per kilogram, compared with the EU average of 43.11 euro cents per kilogram.
However, the price difference alone does not guarantee increased exports. Ukrainian processors will also need to remain competitive in processing costs, meet relevant market requirements and secure reliable logistics. Access conditions for the EU market will also influence how much additional trade can be achieved.
Outlook for the European Dairy Market
The EU dairy sector faces a challenging combination of reduced forage availability, higher feed costs and milk prices that have yet to recover to year-earlier levels. If Rabobank’s forecast materialises, lower raw milk production in the fourth quarter could tighten supplies and influence dairy commodity markets.
For producers, managing feed availability and protecting farm margins will be critical over the coming months. For processors and exporters, the outlook will depend on how quickly milk supplies adjust and whether changing price relationships create new opportunities across European and neighbouring markets.