In Germany, only around half of the retail price of milk goes to producers, whilst the remainder is shared between processors, retailers and the state. As noted by landwirtschaft.de, the prices received by farmers remain unstable and fluctuate significantly.
In 2024, a litre of standard milk in supermarkets cost an average of €1.05, whilst organic milk cost €1.26. According to the Institute of Food and Nutrition (ife), approximately 48% of this amount goes to farmers — this is the price that processors pay for raw milk.
How is the price of milk determined?
Milk goes through several stages before it reaches the shop shelves. After being collected from farms, it is transported to processing plants, where it undergoes homogenisation, pasteurisation and packaging.
According to estimates by ife, around 30% of the retail price is accounted for by processing costs — these include transport, production, logistics, storage and administrative costs.
A further 16% goes to the retail sector, which covers the costs of logistics, staff and refrigeration, and generates its own profit margin. The government receives around 7% in the form of value added tax.
Organic and pasture-fed milk
Producing organic milk involves higher costs and stricter standards, which is why farmers receive a higher price for it. These costs are partly offset by government support.
Pasture milk may also be sold at a premium of between 1 and 2.5 euro cents per litre, depending on the scheme. This type of production requires more resources, but at the same time can reduce feed costs and have a positive impact on animal health.
Research by the University of Kiel has shown that pasture-based farms can be just as efficient, or even more efficient, than intensive farms.
Why are milk prices so volatile?
Milk prices depend to a large extent on the balance of supply and demand in the domestic and global markets.
Dr. Ulrike Ahrens explains: “This is down to supply and demand – both in Germany and globally. If supply is limited, the likelihood of higher prices increases. This is reflected in farmers’ incomes after a certain delay.”
When there is an excess of supply, prices fall. For example, in 2023, a decline in demand for organic milk due to inflation led to a fall in purchase prices.
Market liberalisation also contributed to this volatility — the abolition of quotas and the reduction in state regulation made prices more sensitive to changes in global demand.
Alternatives for farmers
To reduce their dependence on market fluctuations, farmers are using alternative sales channels — direct sales through farm shops, markets, milk vending machines or subscription schemes.
Such approaches allow for higher profit margins, but sales volumes remain limited, and the time and resources required are greater.
The role of consumers
Consumers can make a difference by choosing products from local producers, organic brands or regional brands. Such products usually offer farmers a better price and support local production networks.
Source: landwirtschaft.de
