Dairy commodity prices continue to climb despite weak demand signals and trade risks, but analysts warn that a recalibration may be on the horizon. Milk production is set to grow, potentially tipping the balance in the months ahead.

Global dairy commodity prices have defied expectations by rising across major export regions, even as consumer confidence falters and economic signals weaken. According to RaboResearch, the modest milk production growth seen earlier in the year is expected to accelerate into Q2 and Q3, with annual output from the Big 7 exporters forecast to reach 326.7 million metric tons in 2025 – the largest gain since 2020.

Prices for products such as whole milk powder have surged to multi-year highs, with Oceania exceeding USD 4,300/ton and Fonterra projecting a record NZD 10/kgMS payout for the 2025/26 season. The US also saw bullish trends supported by tight inventories and strong Q1 exports, despite the threat of retaliatory tariffs from China and Canada.

Mary Ledman

However, the upward momentum may not last. “We anticipate downside risks emerging in the second half of the year, driven by expanding supply and demand uncertainty,” said Mary Ledman, Global Dairy Strategist at RaboResearch. Rather than a crash, the report predicts a market correction as buyers react to rising production and economic headwinds.