Milk outlook
Milk production surged in Q4 2025, creating broad downward pressure on dairy prices.
Rising milk output across major regions incl. US, EU, UK, New Zealand and South America has created a supply-demand imbalance. US milk production growth accelerated with the national dairy herd reaching its largest size since the mid-90s, combined with increased milk yields and butterfat levels. This supply surge has exceeded absorption capacity, resulting in sharp price declines for cream and butterfat. EU milk production has also rebounded sharply since summer due to favorable conditions and delayed calvings.
Wholesale milk and butter costs should decline materially through Q1 2026. Milk prices are projected to decrease 7% in 2025 with continued pressure into early 2026. This creates a shelf pricing opportunity - consumers are stressed about dairy prices and will reward retailers who pass savings through quickly.
Plan your retail pricing communication: Don't wait passively for wholesale cost reductions to pass through. Proactively reduce milk, butter, and commodity dairy prices on shelf as supply increases visibly in Q4 2025 and Q1 2026. Signal to consumers that dairy affordability is returning - this builds loyalty and recaptures volume from competitor stores.
Commodity dairy prices are declining broadly, but protein-based products remain firm.
The unexpected production increase has created downward pressure across dairy commodities. However, milk proteins and whey remain supported by sustained demand from high-protein product consumption in sports nutrition and food fortification sectors. Demand has weakened for value-added products in the HoReCa sector, but retail remains resilient.
Butter and commodity milk will see the sharpest cost relief, allowing aggressive shelf price reductions. Protein-focused dairy products (yogurts, high-protein milks) will maintain pricing power - protect margins on these SKUs while using commodity milk and butter reductions to drive traffic.
Category strategy: Maintain firmer margins on protein-focused dairy products while aggressively pricing commodity milk and butter. Use price reductions on commodities to drive traffic and basket size, then protect margins on value-added SKUs where consumer demand is resilient
Production growth is expected to continue into Q1 2026, keeping market sentiment bearish.
Farm milk prices remain profitable, supporting continued milk supply growth. Dairy processors are beginning to cut payouts progressively, but this will happen gradually. Market sources indicate bearish sentiment as production is expected to grow through early 2026.
Most December and January deliveries are already contracted, leaving limited scope for additional buying ahead of seasonal peaks.
Build forecasts into your dairy dashboard: Model out expected milk price declines through Q2 2026 to understand when your margin compression will be most acute, then plan butter promotions strategically before wholesale reductions force your hand.
Milk forecast
Milk prices have come down quite a bit in both the EU and the US.
Our forecast for EU milk is that it will find a seasonal low around Spring.
However, we could see a short upward correction before the low is in place. This decline is supported by the current high supply and weak demand. Thus, the current downtrend is expected to hold into spring 2026.
For US milk, we expect that prices are going to continue downward into the beginning of 2026 due to the high supply.
However, we expect that prices are going to start to increase in 2026 once demand starts to pick up.
Expana creates specific, quarterly price targets two years out, along with fundamental graphs and technical models that substantiate the views.
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