December 2025 marked a notable milestone in the German milk market: the price gap between conventional raw milk and organic milk reached its highest level in the past five years, at around 15.6 EUR/100 kg (natural volume). This divergence is not simply a statistical curiosity; it reflects a deeper structural difference in how the two segments respond to market signals.

Since August 2025, organic milk prices have risen consistently, by approximately 1–1.4% month-on-month. Conventional milk prices, however, remained stable through mid-year before entering a downward trend in the final quarter. The result is a widening premium that is best understood through the lens of price transmission and consumer behavior.

This divergence in price responsiveness is the key driver behind the current premium expansion.

The widening gap also has implications for consumer behavior. As conventional prices fall, the relative premium for organic milk shrinks. Consumers perceive the premium as smaller and more affordable, which can encourage a shift towards organic products. This is not necessarily a shift in values, but in terms of perceived value. Organic milk becomes a more realistic option when the price difference feels manageable.

Historically, the premium tends to narrow during periods of high commodity prices. In 2022/23, when both conventional and organic prices rose, consumer price sensitivity increased. Households did not reduce dairy consumption, but they did adjust product value, moving from premium to conventional options to manage budgets. The premium therefore behaves like a barometer of consumer tolerance.

The current situation is a mirror image. The premium is expanding because conventional prices are retreating, not because organic prices are accelerating. This suggests that the organic segment is benefiting from relative weakness in the conventional market.

The sustainability of this situation depends on the future path of both market segments.

If commodity prices remain weak and conventional prices continue to soften, the premium could remain elevated, supporting organic demand. In that scenario, organic production may become more attractive for farmers seeking price stability and a clearer value proposition.

However, if commodity prices rebound, the premium is likely to shrink again. When conventional prices rise, the relative attractiveness of organic decreases, and households may revert to conventional products to manage costs. This is the pattern observed in previous cycles.

An additional factor to consider is the evolving public narrative around milk consumption. Milk is increasingly being discussed in the context of basic nutrition and dietary guidance, with a renewed emphasis on its role as a staple food. If this narrative strengthens, it could shift demand toward conventional milk not because of price, but because of perceived necessity.

In that case, the premium would face renewed pressure.

The record-high gap at the end of 2025 should therefore be read as a temporary state rather than a structural shift. It is a snapshot of a market where conventional prices are under pressure and organic demand remains resilient.

The premium is wide, but it is not secure.

And in a market where narratives and prices interact, nothing stays wide forever.