Rabobank’s Q2 2025 global dairy outlook warns of fragility behind soaring commodity prices amid trade turbulence, fragile demand, and animal disease threats.
The global dairy industry continues to defy expectations with persistently high commodity prices, even as economic headwinds and trade instability loom large. Rabobank’s Global Dairy Quarterly Q2 2025 report, released June 11, cautions that the current strength in the market may not be sustainable—raising the question: is this rally too good to be true?
Trade Policy: Tariffs Hit Pause, But Uncertainty Persists
Dairy trade flows remain highly sensitive to international politics, particularly the US–China trade dynamic. On May 12, a 90-day pause was announced in the escalating tariff war. In a significant move, China slashed retaliatory tariffs on US dairy imports from 125% to just 10%, giving temporary relief to exporters.
Key US dairy ingredients like dry whey, whey permeate, whey protein concentrate (WPC), and lactose are now more competitively priced in the Chinese market. This led to an immediate drop in domestic Chinese prices for WPC and lactose.
However, Rabobank warns that the 90-day cooling-off period is exactly that—temporary. Any further escalations or reversals will directly impact dairy processors, ingredient manufacturers, and food companies globally.
“Trade volatility makes long-term planning nearly impossible,” said Lucas Fuess, Senior Dairy Analyst at Rabobank. “Processors face immense difficulty securing predictable supply chains and managing costs.”
EU Dairy Hit by Animal Health Crisis
In Europe, animal disease continues to cast a long shadow over dairy production. Outbreaks of foot-and-mouth disease (FMD) across central Europe—specifically in Germany, Slovakia, Austria, and Hungary—caused sharp production drops and disrupted exports. While no new FMD cases have been reported since early May, the risk remains elevated.
In addition, the Bluetongue virus (BTV), which severely impacted the EU milk supply in 2024, continues to have residual effects into 2025, especially in vulnerable livestock populations.
These disruptions, while regional, contribute to tightening global supply conditions, adding another layer of price support, even as demand in some regions remains sluggish.
Looking Ahead: Market Recalibration Expected
While high prices and geopolitical uncertainty prevail, Rabobank expects a gradual recalibration in global dairy markets during the second half of 2025. This will likely be driven by:
- Increased global milk supply from key production regions
- Weakening consumer demand in inflation-impacted economies
- Normalisation of trade patterns, assuming tariff stability
Still, with disease threats, erratic trade policies, and supply chain fragility all in play, stakeholders must brace for continued volatility.
“It’s a strong market on shaky ground,” said Mary Ledman, Rabobank’s Global Sector Strategist for Dairy. “Dairy players need flexible, data-driven strategies to navigate what’s shaping up to be a volatile second half of 2025.”