Global dairy prices under pressure Rabobank Q4 outlook
Global dairy markets softened through Q3 2025 and fell sharply in Q4 2025. In Oceania, spot prices (in USD) for the dairy commodity complex remain weak. Butter has led the decline, down 9% since the beginning of October, and 24% below its peak earlier this year. Whole milk powder (WMP) and cheese have followed suit, each 7% down in the beginning of the quarter. Skim milk powder (SMP) prices have held up better, declining a mere 1% from the already low prices felt earlier in Q3. Too much milk for market, combined with strong milk solids growth, has contributed to a sharp decline in commodity prices.
The expansion of milk flows emerged from healthy margins and strong farmgate pricing, which peaked in Q4 2024 for Northern Hemisphere producers. Today, margins remain largely positive but are expected to tighten for producers as milk cheques are increasingly pared back in the majority of global exporting regions. In Argentina, margin pressure is clearly pinching, and China’s ongoing downturn in milk price continues to support industry consolidation. Farmgate pricing pain is likely to intensify through Q2 2026.
Global milk production growth is on track to finish strong in 2025. While growth is estimated to have peaked in Q3 2025, Q4 will be not far behind. The EU and UK posted their strongest growth since 2017 for the month of October, and surging US milk flows in October posted their fifth consecutive month of growth rates over 3%. Not to be outdone, New Zealand farmers have been setting new milk solid records each month from May to September 2025, peaking in October with the third highest output on record. South America is also shaping up to deliver a significant annual volume increase. Output from the Big 7 is forecast to finish 2025 up 2.2% YOY, before slowing to just 0.12% in 2026, as margin pressure builds.
Global dairy markets still face headwinds on the demand side, with low-and middle-income consumers impacted the most. Ongoing sluggishness in demand remains the case across many foodservice channels, while consumer confidence is deteriorating in the US and clearly still struggling in China, with discretionary spending under pressure. The effects of an uncertain macro picture are flowing through to the food markets. Meanwhile, the effects of high commodity prices are still to be fully felt at the retail level.
The global dairy market will face a period of weaker commodity prices in the face of ample milk supplies into 2026 and exportable surpluses. Demand remains fragile and – in the absence of any supply shock to impede surplus milk – raises the risk of prolonged weak pricing through mid-to-late 2026 as surplus milk enters the market. Weaker prices should eventually support a gradual recovery in demand, with commodity prices returning to historical averages by year-end 2026.
Source : Dairynews7x7 Jan 1st 2025 Rabo Bank Q4 Report Summary