RaboResearch Says Global Dairy Markets Are Becoming Supply-Sensitive

In RaboResearch’s third quarterly global dairy report, Emma Higgins, Rabobank’s senior analyst for New Zealand, said milk production growth was weakening across the main exporting regions. Producer margins are also narrowing, while El Niño could affect Southern Hemisphere output during a key production period.

Exports from the Big 7 dairy exporters are expected to grow by 0.5% year on year in the second half of 2026. The report projects a 0.2% contraction in output during the fourth quarter, followed by broadly unchanged growth in the first half of 2027.

Milk powders and dairy proteins have performed better than fats and cheese. Skimmed milk powder prices have risen by 7.6%, while whole milk powder prices have increased by 3%, despite substantial volumes being offered. Demand for protein-rich dairy products has been supported by consumer interest in health and nutrition, as well as dietary trends associated with GLP-1 medicines.

Butterfat prices remain subdued in well-supplied markets, and cheese prices have weakened. The Oceania cheese index reached its lowest level since 2020 in July. European cheese prices also declined despite continued export demand, while US cheese prices remained firm as overseas demand increased. Higher production and plentiful global supplies are weighing on the wider cheese market.

Asian demand has remained resilient, and the Chinese market has been stabilising. Import demand for milk powders, protein ingredients and cheese continues to support dairy trade and absorb available milk supplies, according to Higgins.

The report identifies fertiliser, feed, fuel and freight as rising costs that threaten producer profitability. Energy costs, geopolitical developments and consumer resilience are listed as factors to monitor. RaboResearch said the balance of risks was becoming more supportive for commodity prices into 2027.