Rabobank has revised its milk price forecast for the 2024-2025 season, increasing it by 30 cents to $10/kg MS. The adjustment is driven by slower but steady global dairy production growth and evolving market dynamics.
Global Dairy Production Forecast: 0.8% Growth in 2025
In its latest quarterly report, Rabobank projects that milk production across the Big Seven dairy-producing regions—Australia, New Zealand, Argentina, Uruguay, Brazil, the European Union, and the United States—will rise by 0.8% year-on-year. A similar growth rate is expected in the first half of 2026.
Key Drivers of Growth:
- European Union: Production has fluctuated in recent quarters but is set for a return to growth.
- United States: Annual growth, typically over 1%, has stagnated in recent years but is expected to see modest sub-1% expansion in 2025.
- Oceania & South America: Both regions are projected to contribute to global production gains.
Rabobank Senior Agricultural Analyst Emma Higgins highlighted the US supply expansion in 2025, stating:
“While growth is expected, it will likely remain modest, staying below 1%.”
Overall, global dairy supply from the Big Seven is set to reach 325.8 million metric tonnes in 2025, up from 323.2 million tonnes in the previous year.
China’s Diverging Path & Global Dairy Demand Trends
Unlike other regions, China’s milk production is expected to decline in the coming year. However, Chinese dairy demand is projected to improve, albeit at a slower pace due to domestic economic challenges.
Meanwhile, demand in other key regions remains strong:
- US cheese exports surged to a record high in 2024, with continued positive trends expected.
- New Zealand is securing buyers for additional milk output, supporting record-high milk prices.
Trade Barriers Pose a Risk to Global Dairy Exports
Despite the positive market outlook, evolving trade policies—especially in the US—pose potential risks to the global dairy market. Higgins warned:
“Dairy exports have not yet been negatively impacted, but the threat remains serious. A reduction in exports could put downward pressure on US milk prices.”
New Zealand’s Dairy Market Outlook: Strong Start but Weather Risks Loom
New Zealand’s export volumes are expected to remain robust in early 2025, supported by higher milk flows and strong demand. The milk price forecast is up by NZD $2/kg MS compared to last year, boosting farmer confidence.
Additionally, recent drops in the Official Cash Rate have alleviated interest rate pressure, further reinforcing market optimism.
However, weather conditions could impact production. While early summer rainfall was beneficial, recent dry spells in the North Island and eastern South Island have disrupted milk flows. Higgins cautioned:
“If significant rainfall does not arrive soon, milk production could end abruptly in key North Island regions.”
Conclusion: Cautious Optimism for the Dairy Industry
With rising milk price forecasts, steady global demand, and improving confidence among farmers, the dairy industry enters 2025 on a positive trajectory. However, climate conditions and geopolitical trade shifts remain key variables to monitor in the months ahead.
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