Production and Demand

Europe. In the fourth quarter of 2025, there was a sharp increase in raw milk production in the EU due to favorable weather conditions. Sufficient rainfall, an increased feed base, and a warm autumn contributed to the fact that milk yield volumes in the EU in the fourth quarter, according to preliminary estimates, increased by 6%, which is a significantly high figure for recent years. The main contribution was made by Eastern European countries, while in Western Europe, milk yield volumes grew more slowly. However, in 2025, farmers in Northern and Western Europe managed to stabilize the cost of milk production, which became one of the factors for the increase in raw milk production. Warehouses in the EU are overstocked with dairy products.

However, the anomalous increase in milk yields in the fourth quarter of 2025 is an exception rather than a trend. The baseline forecast predicted a decline in EU milk production by almost 1−1.5% annually. In 2025, the consolidation of dairy companies continued in Europe amid expectations of stagnation and reduction in milk production in the long term. By 2030, milk production in the EU may decrease by 10 million tons, of which up to 2 million tons could potentially be replaced by dairy products from Ukraine.

Dairy exports from Europe grew mainly due to skimmed milk powder. However, according to Edairy News, at the beginning of 2026, demand for this commodity is weaker in Asian countries, which negatively affects the skimmed milk powder market and puts pressure on global milk prices. Asian buyers are purchasing less product than expected. Therefore, skimmed milk powder stocks are growing, further pressuring global prices and exporters' margins. A challenge for European exporters remains China's implementation of temporary tariffs on imports of cheese, milk, and other dairy products from the EU. This decision was a consequence of a previous anti-subsidy investigation that began in August 2024.

In the EU, discussions continue regarding the trade agreement between the EU and the Mercosur countries (Argentina, Brazil, Paraguay, Uruguay). Farmers in various EU countries held protests against the agreement. Dairy producers fear competition from cheaper imported goods from South America. The European Commission emphasizes that the agreement includes a protective mechanism: if imports from Mercosur lead to a decrease in production in the EU, tariffs can be restored. The agreement provides for the introduction of duty-free export quotas over 10 years for 30,000 tons of cheese, 10,000 tons of milk powder, and 5,000 tons of infant formula from the EU to Mercosur. These volumes significantly exceed current EU exports to South America. Mercosur producers also gain better access to the EU market through increased quotas and the gradual reduction of tariffs on cheese, milk powder, and infant formula.

USA. According to clal. it, in December 2025, milk yield volumes in the USA amounted to 8.87 million tons, which is 4% more compared to November and 4% more compared to December 2024. In January-December 2025, raw milk production volumes in the USA amounted to 105 million tons, which is 2.5% more compared to the previous year's period. According to IFCN, average annual growth in milk yield volumes in the USA is usually 1.5−2%. The American dairy industry suffered some losses from outbreaks of foot-and-mouth disease and bird flu, as well as extreme weather conditions in certain regions of the USA. However, in March 2025, milk production in the USA began to increase sharply, continuing throughout the following months, particularly in the fourth quarter.

As a result, warehouses in the USA are overstocked with dairy products. Milk production cannot be quickly reduced or increased like in a factory. Farmers receive a signal to reduce production due to low prices, but they cannot simply stop a biological cycle that depends on cows and weather conditions.

The surplus of products, combined with weaker demand, creates pressure on prices. According to the National Milk Producers Federation, wholesale prices for milk, cheese, and butter have been below normal levels for about a year, but the largest drop occurred over the last six months. Demand for dairy products in retail remains relatively stable but is declining in the food service segment, particularly in fast food. According to Dairy Herd, the number of pizzerias in the USA has not grown over the last four years, and per capita cheese consumption has also stabilized (at about 19.1 kg of cheese per capita). Although the domestic market still continues to absorb significant volumes of cheese, partially offsetting weak export demand.

Last year, the USA increased exports of dairy products, including cheeses, especially to Mexico and Asian countries. According to new trade agreements with the EU, Americans began duty-free supplies of dairy products to the European market. American cheeses and butter were in demand due to lower prices than those of producers from other regions.

Oceania. As reported by clal. it, in December 2025, milk yield volumes in New Zealand amounted to 2.71 million tons, which is 8% less compared to November, but 2% more compared to December 2024. In January-December 2025, milk yield volumes in New Zealand amounted to 21.92 million tons, which is 1.8% more than last year. According to IFCN, the growth of milk production in New Zealand was facilitated by favorable weather conditions and increased productivity, especially on the South Island. As reported by the USDA, increased rainfall and higher air temperatures improved pasture growth conditions across New Zealand, leading to increased milk yields.

However, in December, the seasonal peak of milk production in New Zealand passed, and yield volumes began to slow down. According to Dairy Dimension, there are concerns among market participants regarding the negative impact of the El Niño natural phenomenon on grass growth in New Zealand pastures, which could lead to a reduction in raw milk production volumes in the coming months. El Niño causes anomalous weather changes worldwide, specifically causing droughts, floods, and heavy precipitation due to the warming of the Pacific Ocean surface.

A challenge for New Zealand and other whole milk powder exporters is the changes occurring in China's dairy sector. According to Edairy News, China has been pursuing a milk self-sufficiency policy for over ten years. In 2023, China managed to increase raw milk production to 42 million tons thanks to the development of so-called «mega-farms» with large productive cow herds and automated production systems. At the same time, per capita consumption of dairy products in China has been declining in recent years due to economic difficulties, changing dietary habits, and record-low birth rates. Parallel to the decrease in whole milk powder imports, China began to increase its own dairy exports. For example, in 2024, China supplied 70,000 tons of dairy products, mainly milk powder, to countries in Southeast Asia, Africa, the Middle East, and Central Asia.

According to clal. it, in December 2025, raw milk production volumes in Australia amounted to 814,000 tons, which is 4% less compared to November, but 2% more compared to December 2024. In January-December 2025, milk yield volumes in Australia amounted to 8.24 million tons, which is 2.1% less compared to the previous year's period. According to IFCN, throughout 2025, milk production in Australia was affected by extreme weather conditions. However, as reported by Edairy News, despite the reduction in milk yield volumes, the country strengthened its positions in foreign markets and increased supplies of cheeses and dry dairy products to Southeast Asia.

The reduction in milk yield volumes in Australia did not affect the situation on the global market due to a significant increase in yields in neighboring South America. The increase in milk production in Argentina (after a significant reduction in 2024) and the devaluation of the peso contributed to the competitiveness of Argentine dairy products on the global market and an increase in export volumes. According to IFCN, milk production grew in Brazil, driven by increased efficiency of professional farm enterprises.

Dairy Market Prices

Europe. According to preliminary data from the European Commission, in December 2025, the average price for raw milk in the EU was 49.76 eurocents per kg, which is 1.7% less than in November 2025. The unforeseen growth in raw milk production, mainly in Northwestern Europe, affected the accumulation of commodities in warehouses, the collapse of prices for butter and other dairy products, which caused a decrease in purchase prices in the EU.

USA. According to clal. it, in November 2025, the price for raw milk in the USA was 37.57 euros per 100 kg, which is 0.9% less compared to October and 25.14% less compared to November 2024. The decline in purchase prices was influenced by the accumulation of commodities in warehouses and their drop in price as a result of the growth in raw milk production since March 2025.

Oceania. According to clal. it, in December 2025, the price for raw milk in New Zealand was 33.68 euros per 100 kg, which is 0.63% less compared to November and 19.27% less compared to December 2024. The oversupply of raw milk and commodities contributed to the fact that the milk price was lower than in December 2024. However, compared to November 2025, certain signs of price stabilization are noticeable against the background of a slowdown in milk yields in December.

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