Global milk supplies will have to tighten before farm gate prices start to recover in 2026, Ornua has warned.

In a downbeat assessment of global dairy markets, which doubled down on the message delivered at the ICMSA’s AGM, Ornua has forecast that it will be the second half of 2026 before markets start to settle as low milk prices impact global output.

In its latest market report, Ornua pointed out that “market sentiment remains weak” and that milk supply “has been stronger than anticipated, particularly in Europe”.

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Ornua predicted that European milk output will rise by 1.5% in 2025, and could be 4% up on last year for the fourth quarter. Global production is set to lift by around 2.2% in 2025.

“Global demand is steady but not strong enough to absorb the extra supply. As a result, there is more product available,” the Ornua market report stated.

“Buyers are hesitant to commit too far ahead as quarter one futures are flat or weaker. Demand usually improves in quarter two, but for pricing to recover, milk supply needs to tighten,” the report insisted.

Ornua pointed out that US milk supplies were 2.5% higher than 2024 levels for the period of January to October. Output was 10.7% up on 2024 levels in Argentina, and 2.1% higher in New Zealand.

European milk output for January to October was 1.3% up on 2024. Milk volumes were 5.8% higher in Ireland compared to 2024, up 5.3% in Britain, 2.8% higher in Poland, and 1.3% greater in both Holland and France.

Ornua has predicted that milk output will “remain strong in the first half of 2026, before easing as lower milk prices take hold”.

“For 2026, EU-27 milk could fall by 1%, with most of the drop-off occurring in the second half of the year,” the market report stated.

With milk supply strong, European commodity prices are unlikely to improve significantly in quarter one, Ornua predicted.

“After a period of modest demand, buyers should return once prices stabilise and activity usually picks up in quarter two,” the report stated.

The extent to which prices recover will depend on “how quickly lower milk prices impact yield and slow production”, Ornua claimed.

The report suggested that cheese and skim milk powder prices were close to floor levels. However, Ornua claimed that butter prices could slide further this month.

But the report predicted that “low prices should eventually attract buyers, and [butter] demand usually lifts in quarter two”.

“Assuming supply eases in quarter two and demand improves, commodity prices should rise in the second half of the year.

“Though it’s unlikely prices will recover to the levels seen in early 2025,” it added.