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European Dairy Sector Under Pressure as Prices Drop
European Dairy Sector Under Pressure as Prices Drop
John Lancaster, StoneX Head of EMEA Dairy & Food Consulting, discusses the drivers behind falling butter, cheese and skim milk powder prices in Europe.
Key Takeaways
- Butter, cheese and SMP prices have dropped sharply since summer
- Rising milk output and weaker demand are pressuring returns
- Global competition and FX shifts add to farmer challenges
Sharp Declines in Dairy Prices
Lancaster explained that butter has seen the steepest fall, dropping from highs of €8,500 per tonne in June to below €5,500 in September. He noted that cheese and skim milk powder have also followed lower, with market weakness spreading across the dairy complex. “We’ve had a really big pullback on prices and that’s been feeding into the other products as well”.
Milk Output and Supply Shifts
Improved conditions compared to last year, including reduced impact from bluetongue disease, have lifted milk supplies in key producers such as France, Germany and Belgium. Lancaster observed that calving shifts and stronger production have created a surplus just as demand has softened. “Now we’ve got extra milk in Europe when a lot of the producers weren’t really expecting it”.
Weak Demand and Consumer Pressure
On the demand side, high butter prices have pushed consumers and industrial buyers toward substitutes. Vegetable oils priced far below butter have gained share, while bakers and manufacturers have blended butter with alternatives to reduce costs. Lancaster added that export competitiveness has also weakened as US butter remained cheaper than European product.
Implications for Farmers
The combination of weaker commodity prices and stronger international competition is now filtering through to farmgate milk prices. Early signs are already visible in the UK, Ireland, Germany and France. Lancaster warned that “we’ve already started to see milk prices dropping”, with some regions recording sharp cuts. He expects the downward trend to continue with a lag of several months between commodity prices and farmer returns.
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--- Written by Frederic Guetin, StoneX TV Producer
--- Expert: John Lancaster, StoneX John Lancaster, Head of EMEA Dairy & Food Consulting
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