Global butter prices have plunged 34% over the past six months, driven by simultaneous milk supply growth across the United States, New Zealand and other major exporting regions. The market is now facing entrenched oversupply, with little near-term relief in sight as production momentum in key origins remains strong.
US Output Expands, Tightening Global Market Conditions
The United States continues to play a central role in the growing supply imbalance. According to the USDA’s latest Dairy Situation and Outlook Report, 2025 milk production is projected at 230.0 billion pounds, an increase of 0.8 billion pounds on previous estimates. The upward revision reflects increases in both cow numbers and per-cow productivity.
Although most US milk is consumed domestically, exports are set to rise markedly. The USDA forecasts that the country will end 2025 having exported the equivalent of 15.6 billion pounds of milk fat, up by 1 billion pounds from 2024. Lower feed costs expected in the second half of 2025 are projected to stimulate further herd expansion into 2026, with the national milking herd forecast to average 9.475 million cows. Such sustained output growth underscores the supply-side pressure likely to weigh on global butter markets into next year.
New Zealand’s Production Surge Adds to the Downturn
New Zealand’s expanding milk volumes have reinforced global oversupply concerns. Fonterra CEO Miles Hurrell advised farmers that strong milk flows both domestically and globally have driven eight consecutive declines in Global Dairy Trade auction prices. The ongoing weakness has forced Fonterra to narrow its milk price forecast range and reduce the midpoint from NZ$10.00 to NZ$9.50/kgMS, presenting significant financial strain for producers who had budgeted based on more optimistic pricing.
The simultaneous lift in output across multiple exporting nations demonstrates how quickly disease-related disruptions can unwind, shifting the market from tightness to surplus in a matter of months.
Australian Dairy Faces Intensifying Pressure
The global production surge is particularly troubling for Australia, where the dairy sector continues to confront long-term structural decline. The nation’s peak research body expects milk production to fall by 2% in the 2025–26 season, driven by escalating cost pressures, a shrinking national herd, and ongoing farm exits.
Australian Dairy Farmers president Ben Bennett described the combination of falling global prices and domestic supply contraction as “not a good look” for farm viability. Despite around 70% of Australian milk being consumed domestically, retailers maintain close alignment with global market signals due to their ability to substitute locally manufactured products with imports.
