Dairy prices rise despite high milk supply

Global milk production continues to grow at a solid pace. Yet dairy prices are already climbing again. Additional demand from Asia and low inventories play a role. At the same time, uncertainty is building. Trade tensions and geopolitics are making the market uneasy.

Production growth begins to slow

Milk production in the main export regions increased sharply toward the end of last year. Growth reached 4.0% in the fourth quarter. Such a strong increase was last seen in 2014, shortly before the European milk quota was abolished. Across the full year of 2025, the seven largest export regions together produced 332 million tonnes of milk. That is 2.7% more than a year earlier.

Still, the pace of growth now appears to be easing. In the United States, production growth fell from 4.2% in December to 3.2% in January. In New Zealand, growth declined from 3% to 1.6%. Argentina, Brazil, and Uruguay are showing the same trend. Europe remains an exception for now. Milk deliveries there actually increased. In December, the rise reached 5.6%. The Netherlands recorded roughly 6% more milk in January. Weekly figures from France and Germany show similar percentages. Much of that additional milk is being processed into butter and milk powder.

Asian demand pushes prices higher

Notably, dairy prices are rising despite ample supply. Demand from China and Southeast Asia is a key driver. The Chinese New Year and the start of Ramadan traditionally lead to additional imports. Another factor is at play. Algeria has returned to the global market for milk powders after some time away. At the same time, inventories remain low. As a result, prices react more quickly when demand increases.

New Zealand is currently benefiting relatively strongly. The country sits closer to Asian export markets and has free trade agreements with several countries in the region. Europe, meanwhile, is facing additional import tariffs. China raised duties on European cheese and cream by 10 to 12%.

Trade and geopolitics add pressure

Geopolitical developments are also affecting the dairy trade. The announced blockade of the Strait of Hormuz impacts several countries in the Middle East. In 2025, these countries together imported about €3.8 billion worth of dairy products. Roughly €2.3 billion of that came from Europe. Each year, about €410 million in European dairy is exported to this region.

New U.S. import tariffs are adding further uncertainty. President Trump introduced an additional 10% tariff on all countries by executive order. Meanwhile, pressure is increasing for Dutch dairy farmers. Farmgate milk prices are currently about 10 cents below Rabobank’s long-term benchmark assumptions. Last year, those prices were still about 10 cents above that level.

Rabobank.nl