HOW THE DAIRY MARKET ENDED UP IN A PERFECT STORM
The dairy year 2025 has caught nearly everyone off guard, especially in Northwest Europe. At the start of the year, the expectation was that milk volumes would decline. The opposite has happened. Production has increased so rapidly that some people are speaking of a true “milk tsunami”. As a result of that, global dairy prices have fallen sharply in recent months, and a historic correction in milk prices is looming. Below a reconstruction of the past turbulent months.
Rarely have price declines on the European dairy market been as steep as they have been recently. Since June, the butter price in Northwest Europe has fallen by 35% to €4,785 per metric ton by mid-November, the lowest level in more than two years, and the bottom has still not been reached. Gouda foil cheese dropped by a similar magnitude to just below €3,000 per metric ton, roughly €700 under the five-year average, according to DCA Market Intelligence data. Other dairy commodities also lost significant value. Comparable corrections were seen on the Global Dairy Trade, a key global trade platform.
The contrast between the first and second half of 2025 could not be bigger. In the first half, the market remained firm, supported by relatively low milk collection and strong consumption data. Market participants also felt comfortable holding stocks in anticipation of further price increases. Over the summer, sentiment began to shift, although not everyone noticed immediately. The initial price declines were attributed to normal seasonal weakness during the holiday period. But when traders returned to their desks in September, it became clear the situation had changed drastically (Graph 1).
Graph 1: Butter price under pressure Price in € per metric tons
1000 2000 3000 4000 5000 6000 7000 8000
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Strong milk growth in Europe and beyond Around that time, the first milk collection figures for August were released, and they were far higher than expected. In June, the German milk supply was still more than 2% below the previous year’s level. Two months later, it showed a gain of over 2%. And in September, the increase was almost 5%. In France, August deliveries were up 5% year-on-year, reaching the highest level in ten years. Similar increases were seen in the Netherlands, Ireland and Poland, as well as in the United Kingdom, where records were broken. In the months that followed, growth only accelerated. Milk output is also rising sharply in the United States, New Zealand, and Argentina.
The conclusion is clear: high milk prices and low feed costs have driven global milk production significantly higher. In addition, the bluetongue outbreak has disrupted calving patterns, pushing the European production peak later into the year. In hindsight the strong production growth is explainable, but beforehand almost no one expected it.
HIGH MILK PRICES AND LOW FEED COSTS HAVE DRIVEN UNEXPECTED GLOBAL PRODUCTION GROWTH, WITH EUROPE AND BEYOND EXPERIENCING RECORD-BREAKING INCREASES.
Source: DCA Market Intelligence
12 | ADMISI - The Ghost In The Machine | Q4 Edition 2025
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