European drought cuts dairy feed and threatens higher milk prices this autumn

Drought raises the cost of keeping dairy herds productive

A drought affecting much of Europe is reducing the pasture available to dairy cattle and increasing farmers’ dependence on purchased feed. Merca2 reports that grain and forage prices have risen notably in recent weeks, while depleted grass and silage reserves are limiting farmers’ ability to maintain normal milk yields.

The pressure is visible in both the United Kingdom and the Iberian Peninsula. Ian Harvey, chair of the UK National Farmers’ Union dairy board, said grass had stopped growing about six weeks earlier and cattle were being housed sooner than usual. Indoor herds require additional feed, exposing producers to a further increase in costs if widespread shortages cause demand for grain and forage to accelerate.

Farms in Spain and elsewhere on the Iberian Peninsula face a similar problem. Pasture and silage stocks have been reduced, and Merca2 says long-range models indicate that substantial rainfall may not return to large parts of Europe until October. Continued housing of cattle would extend the period in which farmers must rely on costly feed.

Lower milk volumes begin to tighten the supply chain

Feed availability affects both farm costs and physical milk supply. When cows do not receive the diet required to sustain their normal production, yields decline. Merca2 reports that farmgate milk prices have started to rise, but remain well below the level farmers say they need to cover the additional feed expense.

UK processors including Freshways, Müller and Arla have already increased the prices paid to farmers. Spain has its own market conditions, but a broader contraction in European supply would also put upward pressure on Spanish wholesale prices. The effect is expected to reach processed dairy categories—including drinking milk, yogurt, cheese and butter—with a delay of several weeks.

The duration of the dry weather makes the outlook more consequential than a brief seasonal increase. If rainfall remains limited until October, milk volumes could fall further and price pressure could persist for months. Firm demand is adding to the imbalance, according to Merca2, because consumption is not weakening as available supply declines.

Retail impact could emerge from the autumn

Spanish consumers are expected to see the first effects in branded liquid milk and fresh products such as yogurt. Private-label products typically adjust prices more quickly, potentially narrowing their discount to manufacturer brands. Merca2 also expects summer promotions, including three-for-two offers and discounts of 50% on second units, to become less common as autumn approaches.

The situation recalls the cost inflation of 2022, when a litre of whole milk in Spanish supermarkets exceeded €1.20 for some manufacturer brands. That historical level is not a forecast for the current drought, but it illustrates how rapidly retail dairy prices can respond when feed and other production costs rise together.

Harvey has called for dairy processors to support farmers after earlier periods in which excess milk pushed farmgate prices down. Without sufficient compensation, smaller producers could be forced to sell or slaughter cattle, further restricting future milk supply. The final retail impact will also depend on harvests, imports and supermarket purchasing policies, meaning price changes may vary by product and take several weeks to appear.