Dairy farmers in Europe are "under significant pressure" because of weak milk and dairy product prices, analysts at Rabobank have warned.

Abundant milk globally in general has had a "pronounced impact" on dairy prices according to Rabobank's latest Global Dairy Quarterly report.

Analysts found that fat markets have been hit the hardest, with prices falling by more than 40% from September to February.

However whole milk powder (WMP) prices have also seen a sharp decline by around 30% over the same period.

Meanwhile protein markets - including skimmed milk powder (SMP), cheese, and whey - have shown to be more resilient, although some prices have also fallen by around 15%.

In contrast, whey prices have continued to rise boosted by a universal demand for high-protein products.

Rabobank analysts outlined that margin pressure is building, particularly in Ireland where they said "milk prices are already among the lowest in Europe, despite winter bonuses".

Milk prices

According to Rabobank's latest report, milk production in the EU and UK rose by 5.9% in December. This represented the fourth consecutive month of growth - for the first time in a decade.

Milk prices had remained high until November last year while feed and energy had also been stable or fallen slighly year on year.

Strong milk prices delivered high margins for European farmers which in turn resulted in slower slaughter rates even though herd sizes continued to decline, although at a lower pace than expected.

Other key trends identified in the latest Rabobank report was that yield per cow had risen sharply in Europe primarily through extra feed and milk solids had also improved.

Average EU fat and protein levels in 2025 both rose by 0.03%, also due to better feed.

However the outlook for this year is that milk supply growth in Europe will likely move into reverse, primarily driven by new regulatory constraints and also "margin pressure".

In the Netherlands, enhanced nitrate rules are likely to slow production while margin pressure - particularly in Ireland - will stifle supply growth.

According to Rabobank analysts across Europe currently there are early signs of herd contraction with higher cow slaughter numbers reported in early January.

Despite this analysts believe that milk supply will remain "elevated" in quarter one and quarter two.

Global outlook

According to Rabobank's latest Global Dairy Quarterly report, there are some "tentative signs" of recovery in the market.

"Several consecutive increases in Global Dairy Trade (GDT) auctions, as well as firmer outcomes in GDT Pulse events, have lifted sentiment.

"Milk production in the EU, the US, South America, and New Zealand remains well above last year’s levels, and although the rate of growth is gradually returning to normal, the market is still flushed with dairy products," the report highlights.

Overall, Rabobank analysts believe that globally milk prices are "expected to remain under pressure into 2026" but there is potential upside emerging in the second half of the year.

However they have warned that dairy trade remains impacted by "tariffs, quotas and bilateral restrictions".

Rabobank analysts have also pointed to the potential impact that "geopolitical instability" could have on the global dairy market particularly in relation to Iran, Ukraine and other regions.

"As the Middle East is an important import market for milk powders, fat-filled powders, and evaporated milk, the market will follow the evolving situation in Iran and possible trade disruptions closely," they added.