Global Milk Glut: Dairy Prices Crash as Production Hits “Stunning” Peak

Rabobank and Fonterra warn that surging Global Dairy Production across key exporters is outpacing demand, driving down commodity prices.

A dramatic reversal has hit the global dairy market, with Milk Commodity Prices for butter, milk powder, and cheese sliding sharply as a “stunning” surge in global output floods supply channels. This excessive production has fundamentally shifted the balance, with supply now significantly outstripping consumer demand across major international markets. Analysts are sounding the alarm, cautioning that this current glut is likely ushering in a sustained period of weak pricing that will immediately challenge profitability across the entire value chain.

The sheer volume of this Global Dairy Production acceleration is undeniable, originating from all major exporting regions simultaneously. New Zealand producers set new monthly records for milk solids from May through September, with October logging the third-highest output on record. This unprecedented growth is mirrored across the Northern Hemisphere and South America, with the EU, UK, and US also delivering strong, synchronous growth figures. This collective expansion is the primary driver behind the pressure now bearing down on global pricing benchmarks.

The price erosion is quantified and significant: butter has seen a 9% fall since the start of October, placing it 24% below its high point earlier in the year. Furthermore, whole milk powder and cheese are both recording approximately 7% drops this quarter, according to Rabobank’s Global Dairy Quarterly Report. This rapid depreciation marks a sharp, abrupt shift from the environment just months ago when butter prices were near record highs globally, demonstrating extreme volatility within the Dairy Market Outlook.

This global pricing pressure is rapidly translating into painful cuts at the farmgate level, directly impacting producer revenue. Irish processors, exemplified by Lakeland Dairies, have moved to drop November Farmgate Returns, cutting prices by 4c/L in the Republic and 3.5p/L in Northern Ireland. With current average Irish production costs assessed at 42c/L (Ifac), the forecast of a 37c/L base milk price and a predicted 45% collapse in farm margins for 2026 (Teagasc) signals a critical financial squeeze for producers.

Despite the immediate market slump, industry leaders are navigating the environment with strategic long-term vision. Fonterra, while announcing a lower 2026 forecast for its Farmgate Milk Price (€4.47-4.96/kg MS, down from a prior record of €5.04/kg MS), simultaneously revealed plans to increase butter production at a New Zealand plant. This action indicates a strategic decision to tap into what the world’s biggest dairy exporter views as rising long-term global demand for natural foods, balancing current volatility with faith in enduring consumer trends.

Access the full analysis of the market downturn and processor response at Independent.ie.

Source : Dairynews7x7 Dec 16th 2025 , A shared article from our partner channel edairynews.com