Global dairy quarterly Q1 2025: Modest growth amid trade shifts

The global dairy market is poised for modest growth in 2025, driven by steady supply expansion and export demand amid evolving trade dynamics. After a 2024 that saw milk production weakness across most key dairy-exporting regions, followed by generally higher farmgate milk prices, the industry is now shifting into a period of supply expansion. RaboResearch expects milk production in the Big 7 export regions to expand by 0.8% YOY, with a similar gain in the first half of 2026. The forecast is driven largely by a return to production growth in both the EU, where production has oscillated between growth and contraction in recent quarters, and the US, where the typical annual gains of 1% have stagnated in recent years. However, while expansion is expected, growth below 1% remains modest. Production gains are also expected from Oceania and South America, largely driven by prior year declines that are easy to surmount. As milk production increases, the market will seek balance. Prices should remain supported, as this slower growth rate will not translate into surging stocks or general oversupply.

Dairy farmers in most regions will benefit from additional revenue in their milk checks due to the increasing milk flow. Sentiment is likely strongest in New Zealand, where Fonterra maintains a firm NZD 10/kgMS mid-point milk price forecast for this season – an impressive figure, especially with falling interest rates. Margins are also healthy in Australia, Brazil, the EU, and the US, with most areas experiencing elevated milk prices and lower feed costs, a common global theme this quarter.

Outside of the Big 7, it appears that China has taken a different path this quarter, diverging from most trends seen in the rest of the world. Milk production dropped in 2024 following several consecutive years of significant expansion, representing a stark break from the recent trend. Fewer cows and the steeper-than-expected decline in Q4 2024 led RaboResearch to reduce its 2025 milk production forecast, which is now down 2.6% YOY, marking the second successive year of lower production. Early February Chinese farmgate milk prices were down 15% YOY in US dollar terms, discouraging any near-term incentive for farmers to increase production. On the other hand, we expect improved demand this year, but at a slower pace, reflecting domestic economic challenges. Imports should also improve compared to a paltry 2024 sum. For years, the world looked to China as a barometer for demand, but as the country rapidly increased dairy self-sufficiency in the first few years of this decade, 2021’s record import year is a distant memory.

Despite China’s retreat from the global demand stage, purchasing in other key regions is encouraging. US cheese exports surged to a record high in 2024, with positive signs for this year. New Zealand is also finding buyers for its additional milk, supporting a record-high milk price. However, potential challenges could disrupt this outlook, primarily related to the rapidly evolving trade barrier landscape as the US shifts away from decades of global alignment. To keep trade balanced and dairy prices supported this year, importers worldwide will need to keep an eye on consumer demand in the wake of recent inflation.