The Italian dairy sector is going through one of the most difficult moments in recent years. While farmers see milk prices plummet and some are even forced to throw away thousands of litres, nothing changes for consumers on supermarket shelves. A paradox that tells a lot about the distortions of our food system and the need to rethink the entire supply chain.
After two years of record prices, with milk exceeding 60 cents a litre, the market has turned upside down. Today, spot milk — the portion sold outside long-term contracts — has plummeted to 27-30 cents a litre, losing more than 8 cents in just two weeks in mid-to-late December 2025, a drop of around 54% from the previous year.
Although spot milk represents only 5-10% of the total market, it acts as an indicator for the entire sector, indirectly influencing long-term contracts and generating strong pressures throughout the supply chain. Some processing companies have threatened not to renew contracts or to renegotiate downwards, putting many farmers in economic difficulty.
What happens in companies
The situation in the countryside is very serious. In the province of Pavia, a farmer had to throw away 160 quintals of milk in a few days: his 340 cows produce 30 quintals a day, but he only found buyers for 50 quintals a week. Some collection centers offer as little as 6 cents per litre, a figure that doesn’t even cover production costs.
And here a first structural problem emerges: how much does it really cost to produce a liter of milk? According to the farmers it is around 50 cents, but there is no certain and shared figure. This makes it very difficult to negotiate with the purchasing party in a fair manner.
Production costs have changed profoundly in recent years. It is no longer just a question of the price of feed, today the amortization of investments made (often encouraged by public support plans) and the cost of labour, which is increasingly difficult to find and increasingly qualified to manage very modern, robotic and technological stables, weigh enormously.
The analysis of the crisis starts from a fundamental error, as explained by Gianpiero Calzolari, president of Granarolo, one of the largest Italian dairy companies: “We imagined that it could be produced infinitely“.
After the price peaks of 2023-2024, many farmers invested by buying new cows. Exports were going very well, especially for DOP cheeses, and this made people think that the market was infinite. But Calzolari had already warned in March 2025: the high price of milk must be reflected in the final market, and consumers do not have unlimited spending capacity.
Added to this were external factors. In France and Germany, a Bluetongue epidemic concentrated the births of calves in a short period, generating a peak in production which also spilled over into the Italian market. On the demand side, inflation has reduced consumption in Europe, while China has imposed tariffs of up to 42.7% on European dairy products in retaliation for EU tariffs on electric cars.
At the supermarket, however, nothing changes
While milk has never been valued so low for those who produce it, consumer prices remain stable. Simply put, there is no reduction on the shelves at the supermarket. Milk that costs the farmer 27 cents continues to weigh in the shopping cart as much as when it cost 60 cents.
Large-scale retail trade manages to maintain high profit margins through agreements that protect final prices, regardless of the collapse of raw materials. This means that the entire loss is passed on to the weakest links in the supply chain, the farmers who risk closing, while consumers continue to pay high prices without benefiting in the slightest from the drop in production costs.
In December, the Ministry of Agriculture brokered a deal: 54 cents per liter in January, 53 in February, 52 in March. A compromise that Calzolari judges positively for the collaborative spirit demonstrated, but which does not solve the underlying problem, it is in fact a non-binding commitment, and only covers the quantities produced the previous year. The surplus is left on the spot market, at rock-bottom prices.
“Losing 7 cents in a few weeks is a lot“, comments Calzolari thinking of the previous 60 cents. And the biggest concern concerns March, when the agreement will expire. If the spot market continues at these levels, it will drastically influence the renewals of annual contracts.
The solution?
For Calzolari the way out is clear:
In the end the imperative is that we must produce what is needed, otherwise we waste money and play the game of speculation.
The DOP cheese consortia have production plans that must be respected. The large cooperatives control 65% of Italian milk, if all the actors in the supply chain collaborate, one can reason.
The Granlatte cooperative, which controls Granarolo, is working to contextualize the performance of its farmer members, area by area, to understand who is working efficiently and who is doing something wrong.
It also takes courage to say uncomfortable things to farmers:
Because I understand that for a farmer, increasing production can be almost more important than having an extra cent for a liter. But we must also say that to the extent that we have created the conditions for the market, we can also ask for more milk. If not, we need to stop and count to ten: at the moment the market is saturated – explains Calzolari.
An interesting proposal comes from cooperation. The idea is to create a Common Market Organization (CMO) for milk, similar to those that exist for other agricultural products. The OCM would allow us to have a regulatory tool to better coordinate supply and demand, using the production plans of the PDO consortia and the planning capacity of large companies.
With the increasingly unpredictable climate, more sophisticated tools are needed, perhaps using large calculators and advanced weather forecasts to anticipate problems.
Despite everything, Calzolari is not entirely pessimistic:
As long as reason prevails, the ability to come together and find a solution prevails. If all the actors in the dairy supply chain do it, if the PDOs do it, if large companies like us, like Lactalis, like others, do it, if cooperation does it, then we could be less pessimistic. Furthermore, if we managed to get the idea of a CMO for milk passed, we would also have a regulatory instrument.
