RaboResearch’s state of global dairy: too good to be true?

The current state of play in the global dairy markets, according to the RaboResearch industry analysts, has them titling their second quarter 2025 global dairy update, “Too good to be true?” The trading prices for dairy worldwide have been elevated and there have been bullish trends, even in the US, they note. The answer, is a likely yes, with downsides emerging in the second half of the year, due to expanding supply and uncertainty around demand. That being said, it more likely to resemble a natural correction after a strong performance period, the analysts say.

Global dairy commodity prices continued to rise in recent months across most key export regions, defying expectations and economic headwinds. Milk production growth has been modest. Further into 2025, the sector will need to navigate a mix of bullish supply signals and fragile demand fundamentals. However, production growth is forecast to accelerate to 1.1% in the second quarter and 1.4% in the third quarter – the strongest quarterly increase since early 2021 – driven by growth in the US, EU, and South America.

In total, RaboResearch forecasts 2025 milk production from the Big 7 at 326.7 million metric tons, an increase of 1% year-on-year or 3.2 million metric tons, the highest annual volume gain since 2020.

In many economies, consumer sentiment has waned amid weak and uncertain global economic conditions. “A number of factors are weighing on the demand outlook,” says Mary Ledman, global dairy strategist at RaboResearch. “These include: near-record-low consumer confidence in the US, troubling indicators of economic struggles in China, and declining sales data from restaurants and consumer packaged goods companies across many regions.”

Retail dairy prices saw deflation in nearly all regions during parts of 2024. However, higher milk and dairy product prices in the second half of 2024 have continued into 2025, translating to higher prices for consumers at retail and foodservice outlets.

Meanwhile, commodity prices are up. Oceania whole milk powder exceeded US$4,300/metric ton for the first time since April 2022, and Fonterra announced a record-high forecast price of NZ$10/kgMS for the 2025/26 season. In the US, most dairy commodities showed bullish trends into late May, and dairy exports remained strong through the first quarter, even as retaliatory tariffs from China and Canada loomed.

Ongoing trade tensions and tariff volatility are key risks, says Ledman. “Global trade conflicts remain elevated, with volatility and rapidly changing tariffs emerging weekly. These factors are influencing global dairy trade flows.”