Supply Chain Pressures Are Testing Dairy’s Resilience
Dairy markets are being affected by pressures that have also pushed global beef prices higher. The OECD-FAO reported that international beef reference prices reached a 40-year high in 2025, after elevated feed costs and repeated droughts contributed to smaller herds. Animal numbers are rebuilding slowly, while consumer demand remains strong.
Feed markets have been exposed to several disruptions, including pandemic-related processing problems, the war in Ukraine and geopolitical tensions in 2026. These events have affected energy, fertiliser and trade flows. The International Fertilizer Association has warned that a prolonged interruption to fertiliser supplies could result in rationing and reduce crop output. Uncertainty over fertiliser is already affecting preparations for the 2027 crop season.
Feed supply is also relevant to the traditional behaviour of dairy prices. Brian Quinn, chief product officer at commodity-trading and risk-management software provider Quoreka, said dairy prices are generally regarded as the most mean-reverting among commodity prices. Higher prices normally encourage producers to add cows and increase milk deliveries, while inventories of milk powder and other finished products can rise and help meet demand.
Current feed conditions may restrict that response. High dairy prices and steady demand are supporting production, but the availability and cost of feed depend on fertiliser supply and crop yields. Crop prospects have already weakened in important markets in Europe and North America, although a strong harvest in Brazil has partly offset the pressure. “If you can’t feed the cows, you can’t bring more cows online,” Quinn said.
Quinn said the combination of demand and supply conditions was keeping the market tight. “Demand is staying up and supply is not coming up,” he said. “The cost and availability of feed is making it difficult to produce more.” This could leave dairy prices under pressure for longer than the market’s usual cycle, while producers face higher costs before supply and demand return to balance.
Demand for dairy protein is adding another factor, particularly in the United States. The wider adoption of high-protein diets and increased use of GLP-1 weight-loss medicines are supporting demand for whey protein. Whey production, however, also generates other dairy commodities because more milk is required across the dairy-processing system. Quinn said that a rise in milk output could allow the wider dairy complex to ease.
He compared the situation with oil refining: refineries cannot raise crude processing solely to produce more diesel without also producing other by-products. In dairy, additional milk would normally increase supplies across several products and eventually reduce price pressure. The current uncertainty concerns whether upstream constraints on feed and crops will interrupt that process and raise producers’ costs until prices reach equilibrium.
