21% drop in milk prices accelerates dairy herd decline in the EU

The European Union’s dairy sector is facing falling farmgate milk prices and deteriorating profitability, forcing farmers to reduce their dairy herds. According to FAS USDA, the average EU raw milk producer price stood at €42.2 per 100 kg in August 2026, down 21% from the same month last year and 10% below the 2021–2025 average. The price decline comes amid rising energy, fertilizer and livestock maintenance costs, putting additional financial pressure on producers.

According to USDA forecasts, the EU dairy cow herd is expected to decline by 1% to 18.8 mln head at the beginning of 2027. The largest reductions are expected among smaller and less efficient farms, while large, technologically advanced operations are likely to maintain their herds. The main factors behind the decline include low milk production profitability, stricter environmental requirements, animal diseases and the gradual closure of small farms, particularly in Central and Eastern Europe.

The shrinking herd will also affect overall milk production. USDA forecasts EU milk output to decline by 0.3% to 149 mln tons in 2027, compared with 149.5 mln tons in 2026. Thus, following 1.5% growth in the current year, the dairy sector could shift toward declining production. Even improvements in cow productivity, particularly in Central and Eastern European countries, will not fully compensate for the reduction in herd numbers.

Another major risk factor is deteriorating feed availability due to adverse weather conditions. Prolonged heat and insufficient rainfall in the second half of 2026 negatively affected pastures and forage crops across Western and Central Europe. Grass growth nearly stopped in some regions, while the quality of green corn intended for silage production deteriorated significantly. Reduced winter feed stocks could further limit dairy herd productivity in late 2026 and early 2027.

Despite these challenges, EU milk deliveries to processing plants in the first half of 2026 were 3.5% higher than a year earlier, supported by improved productivity and stable feed costs. However, increased supply contributed to falling farmgate prices following a record year in 2025, when the average annual milk price reached €52.5 per 100 kg. According to USDA, further deterioration in economic conditions and a shortage of young farmers could accelerate structural changes in the European dairy sector, leading to greater concentration of production among large-scale farms.

Tags: Milk, live cattle, EU