European dairy sees prices fall in milk oversupply

The European dairy market has taken a hard hit in a short period of time. The DCA Benchmark Price for Raw Milk has fallen back to €14.50 per 100 kg, the lowest level in ten years. European butter and cream prices have also dropped to their lowest point in five years, according to data from DCA Market Intelligence, a price reporting agency in the Netherlands.
While consumers in supermarkets may benefit from lower prices in the short term, partly due to an intense butter price war in Germany, many dairy farmers are entering the danger zone as milk prices fall below production costs, it warns.

Butter prices in Northwest Europe have fallen by 45% since June to €4,000 per ton, while gouda foil cheese and cream prices under severe pressure. The average milk price in the Netherlands since September has dropped by €13 to less than €42.50 per 100 kg, but the average production cost per dairy €45 per 100kg.

“The production has increased so rapidly since the summer that the market is talking about a ‘milk tsunami,’” says Wouter Baan, dairy and meat analyst at DCA Market Intelligence. “Due to the effects of bluetongue, the calving pattern has been disrupted and the production peak came later this year. At the same time, the rapid rise of the euro is hindering European dairy exports. Altogether, this is resulting in a significant milk surplus.”

The sharp decline in raw material prices is now also reaching supermarkets, despite the fact that retailers often work with long-term contracts. The effects are especially visible in Germany. “A fierce butter war is taking place in the German retail market,” Baan says. “Hard discounters are using packaged butter as a loss leader. The lowest price we are currently seeing is €0.77 for a 250g pack of butter. That is far below the level in the Netherlands. German retailers are known for extremely aggressive price promotions, and we are now seeing those in full force.”


For consumers, this means lower shelf prices, especially heading into the holiday season. At the same time, this price pressure ultimately lands back on the primary producer, the dairy farmer.