Global dairy commodity prices Global dairy commodity prices are expected to remain weak after ‘stunning’ milk production growth in the second half of 2025, according to Rabobank’s latest Global Dairy Quarterly report.
The report says milk production peaked in the third quarter of 2025, with the fourth quarter close behind.
“The EU and UK posted their strongest growth since 2017 for the month of October, while surging US November milk flows posted their sixth consecutive month of growth rates over 3%,” says Tasman-based report co-author, RaboResearch senior agricultural analyst, Emma Higgins.
“Not to be outdone, New Zealand farmers have been setting new milk solid records each month from May to September 2025, with the peak month of October the third highest output on record,” she says.
South America is on track for a significant annual increase, and output from the Big-7 producers – the EU, US, New Zealand, Australia, Brazil, Argentina and Uruguay – is forecast to finish 2025 up 2.2% year-on-year.
Emma says the surge in milk supply softened dairy markets through the third quarter of 2025, with sharp price falls continuing into the end of 2025.
“Too much milk for the market, combined with strong milk solids growth, has driven commodity prices down,” she says.
“By the end of 2025, butter prices had plunged 25% since October, while whole milk powder finished the year 14% lower. Skim milk powder held up slightly better, slipping 6% from already subdued levels.”
However, it’s not all doom and gloom - just yet. “Tasman dairy farmers have reason to smile after the first Global Dairy Trade (GDT) of 2026 delivered a strong rebound,” explains Emma.
“The GDT Price Index jumped 6.3%, breaking a nine-auction slide and showing global demand is alive as New Zealand moves past peak production.”
Emma notes this is a welcome lift after December’s milk price forecast dropped 50c to $9.00/kgMS.
“It’s a timely boost, but demand remains fragile. Without a supply shock to absorb surplus milk, weaker pricing could persist through mid-to-late 2026.”
“The good news is supply growth is expected to slow to just 0.12% this year. That, combined with softer prices, should gradually support demand recovery, with commodity prices likely returning to historical averages by year-end.”
