Milk Outlook
The dairy market underwent a shift in production trends during Q4 2025 following a period of stagnation and weak demand caused by elevated prices through H1 2025.
This change has been driven by rising milk output across major exporting regions, including the US, EU, the UK, New Zealand, and South America, leading to an imbalance between supply and demand.
Milk production growth first accelerated in the US, where the national dairy herd reached its largest size since the mid-90s. US farmers also saw increased milk yields and butterfat levels, adding further supply pressure that exceeded the absorption capacity of the expanding cheese sector, resulting in a slump in cream and butterfat prices. The US continues to capture a larger global market share on the back of competitive pricing.
At the same time, EU milk production has rebounded sharply since the summer, as profitable margins for farmers (due to high farmgate prices and low feed costs), along with favorable weather, and last year’s bluetongue virus cases have delayed calvings and a later seasonal peak milk output.
Overall, this unexpected increase in milk production has exerted broad downward pressure on dairy commodity prices.
It is primarily a supply-driven situation, although demand also weakened, particularly for value-added products, and within the HoReCa sector. In addition, lower competitiveness in the international market for European dairy products has further accelerated the price declines observed in the EU market.
Global milk prices have declined in general, except for protein-based dairy products, across the broader dairy commodities board. Prices for whey and milk proteins remain firm, supported by sustained demand. This resilience is driven by the continued boom in high-protein product consumption, particularly in sports nutrition and food fortification sectors.
Currently, the main driver is milk production growth.
Farm milk prices are profitable, which many sources indicate will support the continued growth in milk supplies into Q1 2026. Dairy processors have started to cut the payout to farmers, but this will happen progressively.
Market sources indicate a bearish sentiment as milk production is expected to grow through early 2026 as farmers continue to benefit from profitable margins and demand is not likely to pick up as most of December and January delivery has already been contracted, leaving limited scope for additional buying ahead Christmas, New Year, Chinese New Year, and Ramadan.
Milk Forecast
Commentary by Peter Laulund Nielsen
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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