European dairy prices show signs of bottoming, but Hungarian producers remain under pressure

European prices approach a possible floor

Europe’s dairy market has not yet recovered, but recent data suggest that the decline in raw-milk and butter prices may be slowing. According to data updated by the European Commission on August 19, the average EU raw-milk price stood at €41.8 per 100 kilograms in July. Prices had fallen substantially during the year, although the latest weekly readings were no longer pointing as clearly downward.

Butter provides another indication that the market may be close to a floor. The Commission reported an EU average of €398 per 100 kilograms, up 0.9% in one week but still 45% below the level recorded a year earlier. The price had risen gradually from about €383 in early July after beginning its decline from above €700 a year ago. The modest recovery remains insufficient to establish a lasting reversal, but it offers the sector its first evidence of stabilization after the sharp fall.

Hungarian farmgate prices continue to fall

Conditions are more difficult for Hungarian milk producers. Data published by Hungary’s Institute of Agricultural Economics on August 24 put the national average producer price for raw milk at 126.45 forints per kilogram in July. That represented a monthly decline of 2.1% and a year-on-year fall of about 40%. The gap between tentative stabilization in the wider EU market and continued weakness in Hungary means that domestic producers have yet to see meaningful relief.

Máté Koncz, president of Hungary’s National Association of Agricultural Cooperatives and Producers, told Népszava that reported milk prices are generally based on voluntary declarations because there is no benchmark exchange price. Actual purchasing offers therefore vary widely. Some farms are offered prices 15-20% below European levels, while other contracts are concluded at 10-15% below the Hungarian average reported by the institute. Current raw-milk prices range from 70 to 150 forints per kilogram, and only the upper end of that range exceeds production costs.

Supply growth and weather will determine the next move

Higher production was a major cause of the price decline. The European Commission said EU cow-milk collections increased 4% year on year between January and April, including a 2.3% rise in April alone. Its July short-term outlook also anticipated further growth in EU milk production in 2026, despite rising costs, geopolitical uncertainty and weather risks. That forecast did not yet incorporate the effects of Europe’s summer heatwaves.

Heat stress and drought may reduce milk yields and ease supply pressure, although the August figures do not yet confirm that outcome. Koncz expects Hungary’s severe summer heat and dryness to lower domestic yields, with the scale of the decline still uncertain. He also warned that cattle slaughter and a rapid contraction in milk production had already begun, calling for government support and action by processors to keep farms operating. Cheap raw material may benefit processors in the short term, but a sustained loss of producers could leave them without sufficient milk in one or two years. Any European price floor would therefore offer Hungary only limited relief unless farmgate prices recover enough to cover costs and preserve domestic capacity.