The Global Dairy Trade (GDT) price index declined by 4.3% in early December, reflecting persistent oversupply and softening global demand as 2025 draws to a close. The latest auction results underline the continued imbalance in international dairy markets, with milk production in all major exporting regions expanding simultaneously, an uncommon alignment that is exerting downward pressure on prices.
Butter Leads Declines as Market Weakens Further
Most product categories posted declines at the latest auction, often regarded as a barometer of global sentiment. The most substantial fall came from butter, which plunged 12.4%, continuing a downward trend that has persisted since May, when prices peaked at their highest level in five years. Conversely, only cheddar (+7.2%), lactose (+4.2%), and buttermilk powder (+1.8%) registered gains.
The pronounced decline in butter prices is tightly linked to widening regional price disparities. According to RaboResearch senior dairy analyst Lucas Fuess, the US butter price has consistently remained below EU and New Zealand levels throughout 2025, prompting global buyers to shift procurement towards the United States. This arbitrage opportunity has helped fuel what could be a record year for US butter exports, with some months showing volumes more than double those of the previous year.
Fuess noted that this dynamic has dragged EU and NZ butter prices downward, contributing meaningfully to the latest GDT decline.
Simultaneous Milk Growth Across Major Exporters Prolongs Oversupply
Global milk production remains robust and is forecast to stay elevated throughout late 2025 and into 2026. Typically, at least one key producing region faces constraints from weather to disease or margin compression limiting output. However, Fuess observed that the US, EU, New Zealand and South America are all recording production growth simultaneously, deepening the supply glut.
Despite falling milk prices in the US, farmer margins remain broadly positive, meaning producers have not yet received a strong enough price signal to cull cows or scale back output. RaboResearch expects US milk production to continue expanding through 2026.
In contrast, the EU is anticipated to enter contraction next year, which may help temper the oversupply, albeit gradually.
Demand Strength Will Be Critical Moving Into 2026
Looking ahead, the industry’s ability to absorb ongoing supply increases will depend heavily on global demand resilience. Fuess emphasised that robust consumption will be essential to offset rising production levels across exporting regions. While volatility remains an intrinsic feature of dairy markets, he noted that US milk prices are unlikely to see major growth in 2026 due to the expanding production base.
Broader Market Insights
The latest IndexBox Market Intelligence analysis provides deeper context, highlighting evolving trends across the global butter and ghee markets, including country-level production, consumption, pricing dynamics and trade flows. The report projects market developments through 2030, offering strategic insight into how prolonged oversupply and shifting competitive landscapes may shape the sector’s long-term trajectory.
