EU Raw Milk Price Collapse Deepens Margin Squeeze for Polish Dairy Sector

EU raw milk prices have fallen sharply to multi‑year lows just as Polish dairy farmers face persistently high production costs, intensifying margin pressure and raising questions over future supply. Fresh data from the EU Milk Market Observatory and Polish statistics show double‑digit year‑on‑year declines in farm‑gate prices, while energy, fuel and feed costs remain elevated. The imbalance is already reshaping regional dairy trade flows and price risk in Central Europe.

For market participants in Poland and neighbouring EU member states, the latest figures confirm that the current downturn in the milk price cycle is turning into a profitability crisis at farm level. While consumer retail promotions in Poland underscore the downward pressure on drinking milk prices, international powder and butter quotations show early signs of divergence, increasing basis and margin risk along the dairy value chain.

Introduction

According to recent data from the EU Milk Market Observatory, the average EU raw milk price fell around 20% year‑on‑year by early August 2026, reflecting oversupply across the bloc and softer demand for key dairy products. This follows an extended period of high prices in 2024–25 that incentivised herd retention and output growth in several major producing countries.

Poland, a leading raw milk producer in Central Europe, is closely aligned with this EU trend. Official Polish statistics indicate that the average procurement price in June 2026 dropped 22.7% versus June 2025 and 3.5% month‑on‑month. At the same time, sector stakeholders report that costs for energy, fuel and compound feed remain high, leaving many producers operating at or below cash‑cost levels. In this environment, processors and traders face growing uncertainty over future milk flows, product mix and export availability.

Immediate Market Impact

The rapid fall in EU farm‑gate milk prices has widened the gap between raw milk values and international quotations for butter, SMP and cheese. EU price benchmarks for skimmed milk powder (SMP) are modestly higher year‑on‑year, with recent quotes around EUR 2,800 per tonne, supported by export demand and tighter cream availability. However, butter prices have corrected sharply from 2025 highs, contributing to overall weakness in the EU milk price index.

For Polish processors, this environment compresses processing margins and increases exposure to spot market volatility. Low raw milk prices reduce input costs but also signal rising financial stress at farm level, creating the risk of sudden supply adjustments later in the season. In the short term, competitively priced Polish dairy products – particularly bulk powders and industrial cheese – may see stronger interest in export markets, but at the cost of unsustainable margins upstream.

Supply Chain Disruptions

While logistics flows in Poland remain physically stable, the economic strain on farmers is emerging as a structural supply‑chain risk. EU analysis highlights that, in many regions, milk prices have fallen below production costs, making current output economically unsustainable over the medium term. If low prices persist, this could trigger herd reductions, farm consolidation and regional shifts in milk collection volumes.

At processor level, weaker profitability may delay investments in plant upgrades, new product lines and sustainability measures. Rising environmental requirements at EU level, combined with high energy prices, are adding capex and operating cost burdens that many smaller Polish dairies may struggle to absorb. Any wave of farm exits would first affect remote collection areas, increasing transport distances and potentially leading to localised under‑utilisation of processing capacity.

Commodities Potentially Affected

• Raw milk (farm‑gate Poland/EU) – Directly impacted by oversupply and weaker derivative product prices; June 2026 Polish procurement prices are down nearly 20% versus the 2025 average.
• Skimmed milk powder (SMP) – EU SMP prices have moved higher year‑on‑year, supported by export demand and tighter cream availability, but remain sensitive to changes in EU milk flows.
• Butter – After a strong 2025, EU butter quotations have fallen sharply, weighing on the milk price formula and discouraging additional cream processing.
• Cheese (bulk and industrial) – Prices show modest support as processors shift milk into higher‑value products, but export competitiveness from Poland and the wider EU remains closely tied to raw milk cost trends.
• Liquid drinking milk (retail Poland) – Deep retail promotions, including sub‑PLN 1 per litre offers in Polish chains, illustrate pass‑through of lower farm‑gate prices into consumer markets and intensifying price competition.
• Feed grains and oilseeds – Although not directly driven by the milk market, continued cost pressure for barley, maize and protein meals remains central to dairy farm margins in Poland.

Regional Trade Implications

For Poland and neighbouring Central European producers, lower raw milk costs underpin competitive export offers for SMP, butter and cheese into MENA and Asian markets. Recent EU outlook reports indicate that EU dairy exports are expected to grow in 2026, supported by higher milk output among key exporters and firm demand for powders. Polish exporters may capture additional share in price‑sensitive destinations, particularly where currency moves favour euro‑denominated supplies.

However, sustained under‑pricing relative to production costs could undermine long‑term supply reliability from the region. Countries with structurally lower costs or stronger policy support may gain market share if Polish and other EU farmers curtail output. Within the EU single market, price differentials between member states are widening, encouraging processors in higher‑price regions to source spot milk and ingredients from lower‑price origins such as Poland, but also amplifying intra‑EU competition.

Market Outlook

In the short term, global dairy markets are likely to remain characterised by divergent trends: pressured farm‑gate prices in the EU and Poland, relatively firm protein values, and subdued but improving sentiment in some export destinations. Traders should expect continued volatility in butter and SMP spreads, with Polish origin remaining among the more aggressively priced within the EU.

Key variables to monitor include any acceleration in herd reductions in Poland and neighbouring EU countries, policy responses at EU and national level to producer margin stress, and developments in external demand, particularly from North Africa and the Middle East. If milk deliveries begin to contract meaningfully later in 2026, today’s low prices could set the stage for a sharper up‑cycle in 2027, but timing and magnitude remain uncertain.

CMB Market Insight

The current collapse in EU and Polish raw milk prices marks a critical turning point in the regional dairy cycle. For now, abundant supply and subdued butter prices are weighing on farm‑gate values, while selectively firmer protein markets offer some relief for processors and exporters. The structural risk, however, lies in prolonged producer losses eroding the production base.

Commodity market participants should treat Poland and Central Europe as high‑opportunity but high‑risk origins: attractive on price in the near term, yet vulnerable to sudden supply rationalisation if margins fail to recover. Active hedging of dairy product exposure, close monitoring of Polish farm‑gate and feed cost indicators, and flexible sourcing strategies will be essential as the regional market searches for a new equilibrium.