Global Dairy Market Poised for Modest Growth in 2025, Driven by Steady Supply and Export Demand

The global dairy market is set for modest growth in 2025, supported by a consistent expansion of supply and export demand, amid evolving trade dynamics, according to RaboResearch’s first quarterly report for 2025.

A Period of Weakness

Following a 2024 marked by weakened milk production across most key dairy-exporting regions—accompanied by generally higher farmgate milk prices—the industry is now entering a period of supply expansion.

RaboResearch forecasts that milk production in the seven major exporting regions will grow by 0.8% year-over-year (YoY), with a similar increase expected for the first half of 2026.

The outlook is largely driven by a return to positive production growth in both the EU, where production has fluctuated between growth and contraction in recent quarters, and the US, where the typical 1% annual growth has stagnated in recent years.

Modest Expansion Ahead

While growth is expected, an increase of less than 1% remains modest. Gains are also anticipated in Oceania and South America, primarily due to declines in the previous year, which are relatively easy to surpass.

As milk production grows, the market will seek balance. Prices are expected to remain supported, as this slower growth pace is unlikely to result in stockpiling or widespread oversupply.

Dairy producers in most regions will benefit from higher revenues, driven by the increased milk flow.

The outlook is most optimistic in New Zealand, where Fonterra maintains a strong forecast of NZD 10/kgMS for the average milk price this season—an impressive figure, especially amid falling interest rates.

Profit margins are also healthy in Australia, Brazil, the EU, and the US, with most regions experiencing high milk prices and lower feed costs, a common theme globally this quarter.

China on a Separate Path

Outside of the core seven exporters, China is taking a divergent path this quarter, moving away from global trends. Milk production declined in 2024 after several consecutive years of strong expansion—marking a sharp break from recent growth trends.

A smaller herd size and a steeper-than-expected drop in Q4 2024 led RaboResearch to revise its 2025 milk production forecast downward, now expecting a 2.6% YoY decline—the second consecutive year of falling production.

As of early February, Chinese farmgate milk prices had declined by 15% YoY in US dollar terms, discouraging any short-term production incentives for farmers. On the other hand, demand is expected to improve this year, albeit at a slower pace, reflecting domestic economic challenges.

Imports Expected to Rebound

Dairy imports are also expected to improve in 2025 compared to a weak 2024. For years, China was viewed as a barometer of global demand, but as the country rapidly increased self-sufficiency in dairy during the early 2020s, the record import year of 2021 has become a distant memory.

Despite China’s retreat from the global demand spotlight, demand from other key regions remains encouraging. US cheese exports reached record highs in 2024, with positive signs for further growth this year.

New Zealand is also finding buyers for its surplus milk, helping sustain record milk prices. However, potential challenges could disrupt this outlook, particularly those tied to the rapidly evolving trade policy landscape, as the US distances itself from decades of global trade alignment.

To maintain balanced trade and supported dairy prices in 2025, importers worldwide will need to remain attuned to consumer demand trends, particularly in the wake of recent inflation, analysts note. (Photo: AI Generator)