The drought in Europe is continuing to affect dairy markets. High temperatures and lack of rainfall are causing problems for both crops and animals.

Yields on grass silage and maize crops, which make up a large proportion of the diet in European countries, are low and this is set to affect production in the short and long term.

On top of feed issues, high temperatures across mainland Europe are also causing heat stress issues with cows.

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In countries such as the Netherlands, Germany and France, temperatures are in the high 20s up to mid-30s in degrees Celsius. This has been the case for well over a month and has caused a reduction in both milk yield and milk composition, as well as fertility issues.

This should have a longer-term impact on markets and when coupled with a high cost of production, culling rates are expected to be higher leading to a potential reduction in supply.

Butter, cheddar and skim milk powder (SMP) are all up again slightly on the European market this week.

The price increases are marginal at around 1% week on week, but they offer a hint of positivity to see them trending in the right direction.

Butter is the biggest winner, up €40/tonne this week, which is a jump of €300/tonne over the last five weeks.

Spot milk prices in European countries such as Germany and the Netherlands have almost doubled in price in that same five-week period, suggesting traders in these countries are scrambling for milk as supplies fall.

In international news, New Zealand’s June milk supply was up 4.5% on 2025 levels, suggesting a continuation of their strong back end.