Global dairy markets are entering 2026 under significant supply pressure, even as early signs of price stabilisation emerge. A recent analysis by Rabobank indicates that rising milk production across major exporting regions continues to weigh on international dairy prices.
According to the bank’s analysts, milk output is increasing in most key dairy-exporting countries, with the notable exception of Australia. Relatively low feed costs have encouraged producers to maintain high production levels, keeping global dairy supply elevated.
Falling Prices in the Milk Fat Segment
The most pronounced price correction has occurred in the milk fat category. Prices for products such as butter and other milk fat derivatives have fallen sharply in recent months. Between September and February, the milk fat segment recorded a decline of more than 40%.
Whole milk powder (WMP) also experienced a substantial drop, with prices falling by around 30% during the same period. In contrast, protein-based dairy commodities have shown greater resilience. Prices for skimmed milk powder (SMP), cheese and whey declined by roughly 15%, while whey has recently strengthened due to strong demand for protein-based ingredients.
Signs of Market Stabilisation
Recent auctions on the Global Dairy Trade platform have recorded several consecutive price increases. These developments have improved market sentiment and raised hopes of gradual price stabilisation.
However, production levels remain above last year’s levels in key dairy regions, including the European Union, the United States, South America and New Zealand. As a result, the global dairy market remains well supplied.
Rabobank forecasts that milk production in the seven largest exporting countries will increase by only 0.2% in 2026. This represents a significant slowdown compared with the 2.6% growth recorded in 2025.
Regional Production Trends
The expected slowdown in milk production growth will be most visible in South America, Australia and China. In Europe, analysts anticipate a possible decline of around 0.9% in milk output, which could influence butter and skimmed milk powder markets.
Meanwhile, milk production in the United States is likely to continue growing. Strong beef prices are encouraging farmers to maintain larger dairy herds. Much of the additional milk supply is expected to be directed towards cheese production, including mozzarella and cheddar, as well as whey.
Geopolitical Risks to Dairy Trade
Beyond supply dynamics, geopolitical developments could also influence global dairy markets. Analysts warn that escalating tensions in the Middle East may affect trade flows, as the region remains a major importer of milk powders and other dairy products.
Despite these uncertainties, demand from Asian markets continues to remain stable. This steady demand could provide some support to global dairy prices as markets gradually adjust to evolving supply conditions.
