In January 2014, farmgate milk prices across Europe began a protracted period of slow decline having been close to record highs. Milk prices gradually dropped over a two-and-a-half-year period that saw many farmers across Europe struggling to break even.

However, in the last six months, farmgate milk prices across Europe have rebounded strongly and are now at their highest point in two years. This rapid turnaround in milk prices is most pronounced in the two EU member states most exposed to the global market given their export dependency – Ireland and the Netherlands.

Since June, the average farmgate milk price in Ireland has increased almost 60%, while milk prices in the Netherlands have recovered by 50%. The reason for this sharp recovery in milk prices is simply down to the superior returns available in the market right now for all dairy commodities.

In Europe, butter and cheddar are fetching prices up to €4,500/t and €3,550/t respectively, which is almost 50% and 20% higher than market prices 12 months ago.

Similarly for milk powder, both WMP and SMP are achieving prices 45% and 20% higher than what the market was returning a year ago.

The slowdown in milk production across Europe has fed into this recovery and the outlook for the year ahead is more optimistic. After huge oversupply issues last year, the market is slowly moving to a net-demand position once more.