Rabobank Forecasts European Milk Price Increase as Supply Tightens and Production Costs Rise

Europe | August 2026 – European milk prices are expected to increase during the final months of 2026 as tightening milk supplies, rising production costs, and weaker forage harvests reshape the region’s dairy market, according to a new forecast by Rabobank.

The bank expects processors to increase milk prices during autumn and winter to offset higher operating costs and maintain dairy farm profitability amid growing economic pressures.

Milk Deliveries Expected to Slow

Although milk deliveries across the European Union increased by 3.7% during the first half of 2026, the pace of production is expected to slow significantly in the second half of the year.

Rabobank projects that milk collections during the final quarter of 2026 could fall below the levels recorded at the end of 2025, reflecting lower on-farm production and seasonal supply constraints.

Rising Production Costs Pressure Farmers

European dairy farmers continue to face higher production expenses driven by adverse weather conditions and increasing input prices.

A dry summer has negatively impacted forage production, with European corn harvests expected to decline by 6–7% due to drought. At the same time, higher diesel and fertilizer prices, influenced by ongoing geopolitical uncertainty, are adding further financial pressure on producers.

Rabobank believes stronger milk prices will be necessary to compensate farmers for these rising operational costs.

Regional Milk Prices Show Variation

Milk prices continue to vary across European regions.

In June 2026, the average EU milk price stood at 42.3 euro cents per kilogram, while Spain reported stronger regional prices, with Asturias averaging 49 cents per kilogram and Galicia 44.9 cents per kilogram.

Meanwhile, Portuguese dairy cooperative Lactogal reduced its milk price by 1.5 cents in August, creating additional competitive pressure for dairy producers in neighboring Galicia.

Export Demand Supports Dairy Processing

Despite fluctuations in raw milk prices, Europe’s dairy processing sector remains resilient.

Strong domestic consumption and an 8% increase in dairy export volumes during the first half of 2026 have helped support processor activity.

However, total export revenue declined by 2% as lower international dairy commodity prices offset higher shipment volumes. Recent improvements in skim milk powder and whey prices indicate that global dairy markets may be beginning to stabilize.

Retail Prices Could Face Inflationary Pressure

Rabobank and the European Commission expect dairy processors to gradually pass part of their higher logistics and transportation costs to retailers before the end of the year.

If implemented, these increases could contribute to higher dairy prices for consumers while helping processors and farmers manage escalating production expenses.

Outlook for the European Dairy Market

Rabobank expects milk prices to strengthen during autumn and winter 2026/27 as lower milk supplies and higher production costs rebalance the European dairy market.

The bank notes that maintaining farm profitability will depend on producers’ ability to manage feed costs while processors work to preserve sustainable milk price structures throughout the supply chain.