Global Dairy Output Surges Leading to Significant Commodity Price Declines

Global Dairy Production has reached unprecedented levels, with major exporting regions such as New Zealand, the EU, UK, and the US reporting simultaneous growth in milk solids. New Zealand alone set new monthly records from May through September, and October marked the third-highest output.

This rise in production has led to a sharp decline in commodity prices. According to Rabobank, butter prices have fallen by 9% since October, placing them 24% below their peak earlier in the year. Whole milk powder and cheese prices have also decreased by approximately 7% this quarter.

The price drop is affecting farmgate returns, with Irish processors like Lakeland Dairies reducing November prices by 4c/L in the Republic and 3.5p/L in Northern Ireland. This reduction comes amid forecasts of a 45% drop in farm margins by 2026, as noted by Teagasc.

Despite the current downturn, Fonterra is planning to increase butter production at a New Zealand plant, reflecting a strategic focus on long-term global demand for natural foods.