Global Dairy Market Faces Mixed Forces Impacting Price Stability
In the latter half of 2025, dairy producers faced reduced profitability, a factor expected to influence supply patterns throughout the current year. According to StoneX, the international dairy market is undergoing an adjustment following a period of significant price increase. This recent price correction is seen as a stabilization rather than a disruption of the market balance anticipated for the rest of 2026.
Several factors are sustaining the market, including higher-than-expected demand observed in the second quarter, steady protein consumption, and climate and animal health risks. However, challenges include high production levels among major exporters, large butter stocks in Europe, and slower purchasing rates from importers who replenished stocks in the first half of the year.
In the United States, dairy production continues to grow, albeit at a slower rate, with annual growth decelerating from 5% in the first quarter to approximately 3.5% in the second quarter. Despite this, profitability remains high due to milk prices hovering around or above breakeven points and gains from selling crossbred calves and cull cows. Investment in processing capacity has also enabled production expansion.
In the European Union and the United Kingdom, dairy supply is also on the rise but at a more moderate pace. Margins remain positive, albeit lower than those of 2025, amidst growing climate-related concerns. The second quarter experienced warmer and drier conditions in parts of Europe, raising concerns about the effects of El Niño. StoneX also highlights animal diseases such as Bluetongue and potential Foot-and-Mouth Disease as risks being monitored.
New Zealand concluded its 2025/26 season with an estimated 4.4% growth, the highest since the start of the decade. Favorable climatic conditions and high producer profitability contributed to this growth, although the country's reliance on pastures makes it vulnerable to El Niño impacts.
StoneX notes that the market is navigating opposing forces: increasing supply coupled with sustained demand for proteins and ongoing climate and health risks, which maintain price support and reduce the likelihood of a significant price drop in the near term.
