Firm dairy product prices have pushed farmgate prices in New Zealand and Europe, rising 27% and 18% YOY, respectively. Well-supplied global feed markets have kept a lid on prices. Overall, good farmgate margins are supporting increased milk production, led by the US and New Zealand.
Milk production across the Big-7 exporting regions will peak in 2H 2025, with growth continuing in 2026, but at a more moderate rate. On an annualized basis, milk supply in the Big 7 is forecast to increase by 1.6% in 2025 and 0.6% in 2026, resulting in a combined growth of 7.1m metric tons across the two years. The slowdown in milk production growth in 2026 is largely due to strong year-on-year comparables.
In the US, milk production is gaining pace, on the back of herd expansion. In South America, milk collections are strong against weak comparables. The outlook across Europe is mixed, as a slow recovery is underway in regions affected by the bluetongue disease. Some regions are grappling with dry conditions, but supply growth in the EU is expected to be positive, led by Ireland and Poland.
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The Oceania spring flush is fast approaching. October will be the peak volume month for both Australia and New Zealand. While Australia is facing a weaker spring peak due to feed shortages and a smaller herd, New Zealand has a solid footing for a strong peak. The forecast payout is currently set at a record high, and seasonal conditions are broadly ideal in many regions in Oceania.
Foodservice channels remain a key area to watch for demand settings. Foot traffic is sluggish in many major economies, and ongoing weakness in consumer confidence continues to weigh on discretionary spending among low- and middle-income consumes.
Dairy demand in grocery channels is also underwhelming in many countries. Households are paying more for dairy products, as inflation in the dairy aisles is on an upward trend in some regions.
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