July 14, 2025 – Global dairy prices have remained elevated in recent months, driving food inflation and squeezing consumer demand. However, analysts now anticipate a potential moderation in milk and dairy product prices—as long as farm-level margins stay sustainable, according to Monica Ganley, analyst with the Daily Dairy Report and principal at Quarterra, an agricultural consultancy based in Buenos Aires.
Ganley explained that while global dairy inflation is a concern, producer profitability remains stable, which could allow price corrections without threatening milk production.
“Milk and dairy product prices could moderate soon without hurting milk production if farm margins remain decent as expected,” said Ganley.
Butter and Cheese Fueling Dairy Price Index Surge
The Dairy Price Index (DPI), released by the Food and Agriculture Organization (FAO), rose 0.5% in June from May levels, reaching 154.4 points. The surge was largely driven by robust butter prices, with appreciating cheese prices also contributing.
“The index has been moving higher almost continuously since late 2023 and now sits just 3.8 points shy of the record high notched in June 2022,” Ganley added.
Although prices for whole milk powder (WMP) and skim milk powder (SMP) declined in June, these drops were not enough to offset the rise in fat-based products.
Global Milk Production Up, But Demand May Soften
On the supply side, milk production has expanded across several major dairy-exporting nations, spurred by favorable weather conditions and farm margins. Year-to-date collections in EU-27 and the UK rose marginally by 0.2% in the first four months of 2025, but output in the U.S. and New Zealand has been robust, and production in South America is recovering.
While this increased supply may help temper prices, geopolitical instability and U.S. trade policy uncertainty could suppress global demand for dairy in the second half of the year.
“Although higher food and dairy prices have the potential to negatively impact consumer demand, lower values could be on the horizon,” Ganley noted.
June Food Inflation Snapshot
The broader FAO Food Price Index (FPI) also rose 0.5% to 128 points in June, with prices 5.8% higher year-over-year, though still well below 2022 peaks. Dairy joins meat and cooking oils in registering price increases, while sugar and cereals saw declines.
Despite the inflationary pressure, analysts remain cautiously optimistic that dairy prices could stabilise if consumer spending continues to slow and milk supply remains strong globally.
