Global Dairy Markets Face Imbalance as Supply Surges in Late 2025
Ornua's latest market report from December 2025 presents a cautious view of the global dairy landscape, emphasizing a growing imbalance between supply and demand. The report highlights that while consumption remains steady across key regions, it is insufficient to absorb the notable increase in milk supply anticipated in the final quarter of 2025, particularly in Europe.
According to Ornua, European dairy commodity prices have continued to decline through late 2025, influenced by persistently weak market sentiment and stronger-than-expected milk collections. The EU-27 is projected to see a 4.0% increase in milk supply in the fourth quarter alone. The reluctance of buyers to commit to forward purchases is also noted, as futures for Q1 2026 remain flat or weaker.
Globally, milk supply growth has exceeded earlier forecasts, with an estimated 2.2% increase in worldwide milk production in 2025. Despite stable demand, it has not accelerated enough to clear the additional volumes entering the market, resulting in increased product availability and limited near-term pricing power.
Ornua details the widespread expansion among major dairy exporting regions, with milk collections rising by 4.3% in October. The EU-27 saw a 4.2% increase in September and a 5.0% increase in October, while the United States and New Zealand also reported strong supply growth.
In contrast, Australia is expected to see a contraction of around 2.0% in 2025 due to adverse weather conditions and rising production costs. Meanwhile, China's milk output is forecast to decline over the year, although recent months show signs of stabilization.
Looking ahead to 2026, Ornua expects EU-27 milk collections to ease, potentially declining by around 1.0%, with most of the contraction occurring in the latter half of the year. The report notes that a meaningful recovery in prices will depend on a tightening of milk supply, with futures remaining flat and buying activity for January 2026 described as typically quiet.
However, Ornua anticipates that as prices stabilize and demand improves, market activity will pick up, usually in the second quarter. The pace and scale of any recovery will depend on how quickly lower milk prices curb production growth.
