German Dairy Market: Milk Prices Decline, but Signs of Future Growth Emerge

In February, the downward trend continued. The primary factor putting pressure on the market remains the high milk supply, which still significantly exceeds last year's levels. Additional volumes are being sold on the spot market at approximately 14 euro cents per kg of milk, which is considerably lower than long-term contract prices.

Despite the current market weakness, the first signs of stabilization are appearing. For instance, the estimated cost of raw milk, published by the Kiel Institute for the World Economy, showed growth for the first time since June 2025. In February, the index increased by 3.6 euro cents per kg (11.2%), reaching 33.9 euro cents per kg. Although this level is still below last year's, the gap between the market value of milk and the actual payments to farmers is gradually narrowing.

Additional positive signals are also coming from the processing side. According to the South German Butter and Cheese Exchange, wholesale prices for dry milk have recently begun to rise.

Global factors are also supporting the market. The Global Dairy Trade (GDT) price index in New Zealand has shown steady growth since the beginning of the year. The average price of dairy products at auctions is now about 3398 euros per ton, corresponding to the level of September 2025.

Nevertheless, analysts warn that excess milk supply will continue to pressure the market at least until summer. Observers anticipate that a reduction in production volumes may only begin in the second half of the year.

A similar assessment is given by FrieslandCampina, which previously stated that a significant recovery of the dairy market in Europe should not be expected before the second half of 2026.