Global Milk Oversupply Impacts Dairy Commodity Prices Until 2026

The Global Dairy Trade (GDT) index has recorded its sixth consecutive decline, highlighting the ongoing pressure on prices. Cheddar cheese prices fell by 6.6% to €3,864 per metric ton, while butter prices decreased by 4.3% to €5,533 per metric ton.

The European Union, which contributes nearly 48% of the production from the world's top six dairy exporters, is a significant player in this supply surplus. Despite declines in production from countries like France, Germany, and The Netherlands due to the bluetongue virus, increases in countries such as Ireland and Poland have offset these reductions. Eurostat data from September indicates a 6.0% year-on-year increase in European milk production.

Analysts warn that the oversupply situation is leading to margin pressures and falling milk prices in Europe. However, a potential increase in consumer demand could arise as lower commodity prices begin to influence the retail market. Specifically, there is expected demand for butter, as consumers and manufacturers may return to it from cheaper vegetable oils.

The market is expected to remain challenging until 2026, when a balance between supply and demand might be achieved.