Record Dairy Supply Pressures Global Prices in September

In September 2025, the global dairy market is grappling with a paradigm shift as record-breaking production from New Zealand and significant increases in the US and South America outpace the weakened demand, resulting in declining prices as reported by the Global Dairy Trade platform. The latest GDT event, number 387, recorded a 4.3% drop, indicating a surplus in supply over demand.

New Zealand is at the forefront of this trend, boasting an 8.9% increase in dairy solids and a 6.7% rise in tonnage year-on-year, primarily driven by winter milking practices and increased use of palm kernel imports, which alone surged nearly 30%. The US followed with a firm rebound of 3.4% year-on-year in July, while production in Argentina and Uruguay expanded by 7.7% and 3.0%, respectively. However, Australia faced a decline of 4.0% due to climatic challenges, China reduced its output by 3.4%, and the European Union saw a minimal growth of 0.2%.

Trade data from July underscored the value-driven dynamism, albeit with irregular volumes. New Zealand maintained stable exports with a 15.4% increase in turnover, while the US and Argentina saw notable increases in both volume and value. In contrast, Australia's exports fell, while Europe's volumes decreased but revenue improved. Notably, China increased its purchasing volume by 5.9% and value by 10.6%, showcasing resilience in demand.

Looking ahead, the pressure on prices, particularly for powdered milk, is expected to intensify in September and October. Producers and industries face the challenge of managing risks in a volatile market environment, potentially leveraging futures or fixed-price contracts to mitigate impacts from the abundant supply and uncertain demand.