Global Dairy Markets Face Challenges Amid High Supply and Geopolitical Risks
Global dairy markets continue to face challenges as milk production remains strong across major exporting regions, excluding Australia. This robust production is supported by relatively low feed prices, leading to elevated supply levels worldwide. As a result, dairy prices have experienced significant declines, with fat markets seeing a reduction of more than 40% from September to February and whole milk powder (WMP) prices dropping by approximately 30% in the same period. Protein markets, including skimmed milk powder (SMP), cheese, and whey, have shown more resilience, with a roughly 15% decline in prices, although whey prices have increased due to strong demand for high-protein products.
Recent market developments show tentative signs of recovery, highlighted by consecutive increases in Global Dairy Trade (GDT) auctions and firmer outcomes in GDT Pulse events. However, current supply data suggests that this upward trend may not be structurally sustainable. Milk production in regions such as the EU, the US, South America, and New Zealand remains above last year's levels, though the growth rate is gradually normalizing.
Looking ahead, the market is expected to tighten gradually, with output from the Big 7 exporters forecasted to rise by 0.2% by the end of 2026, following a 2.6% increase in 2025. This outlook is largely driven by slowing supply growth in South America, Australia, and China. In Europe, milk production is anticipated to decline by 0.9%, becoming more apparent later in the year, particularly impacting butter and SMP markets. Conversely, the US is expected to maintain production growth, supported by high beef prices, with a focus on cheese and whey production.
Geopolitical instability, especially in the Middle East, remains a significant concern for the global dairy market. As the region is a key import market for milk powders and other dairy products, any disruptions could affect global market balances. The situation in Iran and potential trade disruptions are being closely monitored by market participants.
