Global dairy market faces bearish pressure as supply surges. Fonterra expected to cut milk price forecast from $10/kgMS. Analysts watch for rebalancing.
The global dairy market is struggling with too much milk supply and not enough demand, creating strong downward pressure on prices as of November 2025.
This oversupply has forced Fonterra to cut its milk price forecast from $10/kgMS to somewhere in the mid-to-high $9/kgMS range, compared to $10.16/kgMS last season.
Why is there too much milk?
- High milk prices in late 2024 and cheap feed encouraged farmers—especially in New Zealand and Europe—to produce more milk.
- Good weather led to higher yields and healthier herds.
- In the U.S., although total milk volume fell slightly, milk solids (fat and protein) increased, and herd sizes grew by nearly 200,000 cows in just over a year.
- New cheese factories in the U.S. added more demand for milk, motivating further production growth.
Read More: Goat milk vs cow milk: Which is healthier
What about demand?
- Global demand is still growing, supported by population growth and rising dairy consumption, especially in Asia.
- Products like high-protein yogurts and lactose-free milk remain popular.
- However, demand growth is not fast enough to match the massive supply increase.
Impact on Fonterra and farmers
- Fonterra faces tough competition from other New Zealand processors offering better prices.
- Its share of the national milk pool has fallen to 77.8%.
- The drop in milk prices means lower incomes for farmers and tighter profit margins for processors worldwide.
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Disclaimer
I do my best to share reliable and well-researched market insights but but occasional errors or omissions may slip through. Please view all content as informational, not financial advice.
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