Global Dairy Prices Plunge in Q4 2025 Amid Milk Surplus and Weak Demand

Prices: Butter Leads the Decline

In Oceania, spot prices for dairy products in dollar terms remain at low levels. The most significant drop was recorded in the butter segment:

• prices fell by 9% since the beginning of October,

• and are 24% below the peak values reached earlier in 2025.

Prices for whole milk powder and cheese fell by about 7% at the beginning of the fourth quarter. Skimmed milk powder demonstrated a more stable trend, with prices decreasing by only 1% compared to the already low levels at the beginning of the third quarter.

Profitability Under Pressure

The increase in milk supply resulted fr om high profitability and high purchase prices, which peaked for Northern Hemisphere producers in the fourth quarter of 2024. Currently, margins remain generally positive, but all key export regions are experiencing a steady decline in milk prices.

The pressure on profitability is particularly noticeable:

• in Argentina,

• in China, wh ere the continuing price drop accelerates industry consolidation.

Analysts estimate that issues with purchase prices may worsen in the second quarter of 2026.

Production: Growth at Its Peak

Global milk production in 2025 is expected to close with high growth rates. The peak increase is anticipated in the third quarter, but the fourth quarter lags only slightly.

Key observations:

• the EU and the UK recorded the strongest production growth since 2017 in October,

• in the US, milk production volumes in October increased by more than 3% for the fifth consecutive month,

• in New Zealand, from May to September 2025, records were set monthly for solids content in milk, and October recorded the third-highest level in history,

• South America is also preparing for a significant increase in annual output.

It is expected that by the end of 2025, milk production in the seven largest producing countries will increase by 2.2% year-on-year, but growth rates will slow to 0.12% in 2026 due to increased pressure on margins.

Demand: Weakness Persists

Global dairy markets continue to face a lack of sustainable demand, especially from low and middle-income consumers. The food service segment remains sluggish, while:

• consumer confidence in the US is declining,

• China is experiencing difficulties with discretionary spending.

Additional pressure comes from an uncertain macroeconomic situation, with the effects of previously high commodity prices not yet fully reflected in retail prices.

Forecast: Low Prices Until 2026

Analysts expect the global dairy market to enter a period of downward pricing cycles driven by ample milk stocks and export surpluses, at least until 2026. In the absence of significant supply shocks, the risk of prolonged price declines remains until mid-to-late 2026.

At the same time, lower prices should gradually support demand recovery, and dairy commodity prices are expected to return to historical averages by the end of 2026.