Increased global milk output will continue to put downward pressure on milk prices, RaboBank has warned.

A report by the bank’s research arm RaboResearch has forecast that milk production in the world’s seven main dairy export regions will grow by 1.8% year on year for the second half of 2025.

“In the US, milk production posted its strongest growth rate since 2021 (+3.4% year on year), while New Zealand experienced a record start to its new season,” the RaboResearch report pointed out.

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“This growth is driven by improving farm margins, recovery from last year’s disease outbreaks and favourable weather conditions,” the report stated.

“While milk production is increasing, demand remains sluggish, leading to a growing exportable surplus that could put downward pressure on dairy commodity prices into early 2026,” RaboResearch maintained.

“Weak consumer confidence continues to weigh on discretionary spending. The ongoing sluggish demand is evident across many food service channels,” explained global dairy strategist at RaboResearch Mary Ledman.

Consumption slump

“China is still battling a consumption slump and recovery signals in southeast Asia are mixed. In the US, concerns around the labour market and the impact of tariffs are weighing on consumer confidence,” said Ledman.

“We need a boost in consumer sentiment to support a meaningful recovery in dairy demand,” she added.

The unease on global markets was reflected in last week’s Global Dairy Trade (GDT) auction, which was down 4.3% on the previous auction.

Dutch spot prices are also on the slide – albeit from very high levels. Butter prices have fallen by close to €1,000/t since they reached a high of €7,423/t in March. The spot price last week was €6,460/t.

The Dutch spot price for skim milk powder (SMP) is also on the slide. It has fallen from €2,555/t in January to €2,340/t last week.

However, the RaboResearch report insisted that the slide in dairy commodity prices could be reversed by a lift in demand.

“Going forward, the global market appears well supplied. If demand picks up gradually, it should be enough to counter the volume without overwhelming the market, although we could still see some downside pressure on prices in the short term,” Ledman maintained.