Dairy farms are dying quietly: why 2026 will be a test of the sector's survival

Next year will be a challenging year for all dairy market players – milk production is growing faster than demand in many parts of the world, which means that farm gate milk prices are expected to continue to fall. At least until mid-2026, but there is no guarantee that the balance between supply and demand will be restored. The forecast is that next year we will see raw milk farm gate prices as low as we have seen in the last few years.

Huge imbalance between supply and demand

On the European market alone, milk production will far outstrip demand, which, incidentally, is no longer increasing at a global level, while production is, on the contrary, increasing. We are already seeing this at the end of 2025, and experts say the trend will continue in 2026.

Milk production has been boosted in recent years by technology and robotics, as well as by over-supply of feed. Higher production also means more pressure on raw milk farm gate prices, and thus challenges to Lithuanian farms' profit margins.

Internationally, similar dynamics are observed. The index of the dairy trading platform „Global Dairy Trade“ (GDT), managed by the New Zealand cooperative „Fonterra“, has been declining for 4 consecutive months. In the last trading session, the index dropped by as much as 4.3% and so far only theoretically, a possible rebound from the bottom is possible. However, even if this happens, the rise will be short-lived, given the technical price indicators.

The trends in the Oceania area will reach Europe in about 1.5-2 months, but in Europe itself the technical charts do not bode well for dairy producers so far. Data from the CLAL (Clal.it) dairy market monitoring system is sending quite clear signals – the European dairy market has already entered an oversupply phase, which means increasing pressure on raw milk procurement prices in the coming quarters.

In addition, China, for a long time one of the main importers of powdered milk, has not recently increased its imports as much as expected. This means that some EU dairy products that would previously have been exported remain on the domestic market, putting further pressure on prices.

Dairy production in the EU is growing steadily in Germany, France, the Netherlands and our neighbour Poland. This growth is driven not only by a better feed base and productivity gains, but also by farmers increasing milk production rather than reducing their herds to compensate for price fluctuations in previous years.

What should you know?

CLAL signals, which are relevant in Europe, send us a fairly clear message. Looking ahead to the end of 2025 and the beginning of 2026, a moderate decline in prices is forecast, which will be driven precisely by the structural imbalance between supply and demand.

Most analysts suggest that the average farm gate price for raw milk could fall by a few more percentage points from current levels, especially in the absence of strong new export impulses. This would not be a sudden price "crash", but a slow downward price correction, which is dangerous for farmers because it reduces profitability.

Lithuania, which relies heavily on exports, is usually quite quick to pick up on general EU trends. If EU prices are moving downwards, Lithuanian milk purchase prices tend to follow the same direction. Much will therefore depend on how the large dairy processors manage their sales & how they adapt to the imbalance in supply and demand on the export markets.

Sheep die quietly

Farmers can talk all they want and complain that milk prices are unfair and low, but there are no miracles in business – no one is going to give money away. Either local processors or neighbours will buy the milk.  

Lithuania is among the countries that "feed" other countries, mainly Poland, with its dairy cows.

According to the State Agricultural Data Centre, our country will lose more than 1 300 dairy cows by 2025, but this is relatively insignificant when you consider how smaller dairy producers are leaving the market. This year alone, 1 644 farms have closed their farm windows.

This is the macabre reality in Lithuania, where on the one hand, the Minister of Agriculture Andrius Palionis is explaining the importance of livestock farming and the strategic importance of agriculture (as recognised by the Seimas, by the way), and on the other hand, dairy farms are melting away like the spring snows. The Lithuanian countryside is dying quietly, without pathos and the roar of tractors.