Global milk production is forecast to increase by 2.2% in 2026, supported by strong output across several major dairy-producing regions, according to Ornua’s October 2026 Market Report. However, growth is expected to moderate to approximately 1% in 2027 as weather uncertainties, changing demand patterns and potential supply disruptions influence the international dairy market.
The report highlights resilient milk production in the European Union, the United States, New Zealand and South America. Nevertheless, the potential impact of El Niño remains uncertain, with the effects of drought and changing weather conditions possibly becoming more visible in the coming months.
Major Dairy Regions Maintain Strong Milk Output
Milk production across the European Union increased by 1.1% in September 2026, compared with 2.5% in August. Despite drought conditions in recent months, milk flows in France and Germany performed better than expected.
Consequently, Ornua revised its annual EU milk production forecast to an increase of 1.9%, returning it to pre-drought expectations. However, the report cautioned that the full effects of dry weather might emerge later, potentially slowing production growth in the coming months.
Ireland has already experienced production pressure. Milk output declined by 2.2% in July and approximately 4.3% in August, reflecting the effects of drought. This contrast between Ireland and other European producers demonstrates how regional weather conditions can influence milk availability across the wider European dairy market.
In the United States, milk volumes increased by 1.7% in both July and August. Although the pace of expansion has moderated, higher milk solids have supported the outlook. Ornua continues to forecast annual US milk production growth of 2.2% in 2026.
Strong beef prices and additional cheese-processing capacity are among the main factors supporting US dairy expansion. Attractive returns from beef production can influence cattle management decisions, while new processing facilities provide greater capacity to absorb additional milk supplies.
New Zealand and South America Strengthen Global Supply
New Zealand is experiencing record-high milk production, supported by favourable pasture conditions and strong milk prices. According to Ornua, milk flows increased by 2.4%, while milk solids rose by 3.4%.
If the recent production trend continues, annual output could increase by 4% or more. However, El Niño could become a significant factor as the production season progresses, particularly if changing weather patterns affect pasture growth and water availability.
South American producers are also contributing to global supply growth. Favourable production conditions have supported milk output in Argentina, Brazil and Uruguay.
Uruguay has recorded particularly strong performance, with milk production up 12% year-to-date. This expansion adds to the supply available for international dairy trade and increases the importance of monitoring production trends across emerging and established exporting regions.
Global Milk Supply and Dairy Prices Face Changing Conditions
Ornua expects global milk flows to continue expanding, although growth is likely to slow during the fourth quarter of 2026. The report suggests that the full impact of weather-related supply disruptions may not become apparent until early 2027.
Demand conditions remain relatively solid, supported by exceptionally strong dairy exports during the first half of 2026. However, indications of slowing growth suggest that the market may face a more balanced supply-and-demand environment.
European market activity strengthened through September, following seasonal patterns. Skimmed milk powder (SMP) and cheese recorded the strongest price gains during the period.
Despite these improvements, significant dairy price increases during the fourth quarter appear unlikely. Strong milk availability and a modest demand outlook could limit further price appreciation.
Ornua also identified several constraints on demand growth, including slower export demand, inflation and increasing consumer sensitivity to prices. These factors could influence purchasing decisions, international trade volumes and processors’ product strategies.
Outlook for the Global Dairy Industry
The projected 2.2% increase in global milk production indicates that the dairy industry is entering a period of relatively strong supply growth. However, producers and processors will need to monitor weather conditions, milk solids, processing capacity and international demand closely.
For dairy farmers, expanding production opportunities may be offset by higher operating costs or weaker milk prices if supply outpaces demand. Processors could benefit from improved raw milk availability but may face tighter margins if dairy product prices fail to keep pace with procurement costs.
For international dairy markets, the balance between expanding production and moderating demand will be critical. El Niño-related disruptions could alter this outlook, making weather developments an important factor for the remainder of 2026 and the beginning of 2027.