March, 28, 2025
by Sarvesh Yadav
Key Takeaways
- Global milk output up 0.8%—thefirst synchronized growth since 2020.
- EU milk shrinks, but cheeseproduction rises.
- US dairy also faces herddeclines, but cheese exports stay strong.
- China’s dairy imports rebound(+2%), but trade risks persist.
- Butter & milk powdershortages could tighten EU supply.
Global Dairy Market Overview
Global milk production is set to grow by 0.8% in 2025 across key exporting regions, marking the first synchronized expansion since 2020. Improved weather conditions and lower feed costs are driving this recovery. However, rising farmgate milk prices in Europe and New Zealand could create price pressures despite improving farmer margins.
Regional Highlights
European Union: Declining Production Amid Policy Pressures
Milk production in the European Union is forecasted to decrease by 0.2% in 2025, with deliveries expected to reach 149.4million metric tonnes (MMT). This decline is attributed to several key factors:
- A reduction in cow numbers
- Tight dairy farmer margins
- Environmental regulations and disease outbreaks
While milk production is on the decline, cheese production within the EU is forecast to increase by 0.6%,reaching 10.8 MMT. This growth is driven by continued strong demand for cheese, both domestically and internationally, as well as the recovery of sectors like hospitality and tourism. Increased consumption of specialty cheeses also plays a role in this trend.
However, the EU faces significant challenges, particularly in the areas of butter and milk powder production. These sectors are expected to experience declines of 1% and 4-5%, respectively, which may create potential supply shortages.
Additionally, geopolitical risks loom large over EU dairy exports. China’s ongoing investigation into EU dairy subsidies could disrupt trade flows, particularly for products like liquid cream and cheeses.
The US dairy industry faces a complex outlook for 2025, with production forecasts revised downward. The USDA now projects milk production at 226.9billion pounds, a decrease from earlier estimates. This decline is attributed to constraints in herd size and slower growth in milk yield per cow.
Despite production challenges, the all-milk price forecast has been revised upward to $22.75per cwt, reflecting strong demand for cheese and export competitiveness for butter. The United States remains a significant player in global dairy production, with cheese and butter exports expected to grow due to competitive pricing
The industry faces a mixed outlook, with strong demand for certain products offsetting challenges in others. Cheese prices are strengthening, while nonfat dry milk and whey markets face export challenges. Adaptability and strategic positioning will be crucial for dairy producers navigating these complex market dynamics in2025.
China: A Mixed Outlook for Dairy Imports
After years of decline, China’s dairy imports are projected to grow by 2% in 2025. This growth is primarily driven by two factors:
- Reduced domestic production due to environmental regulations and herd reductions
- Rising consumer demand for dairy products
Despite this upward trend in imports, China’s domestic challenges remain significant. While farmgate milk prices have recently increased, they remain low, which continues to put pressure on the domestic dairy industry. Geopolitical developments, including China’s investigation into EU dairy subsidies, also threaten to disrupt trade flows and add uncertainty to the global market.
Key Geopolitical Risks
China-EU Trade Tensions
China’s investigation into EU dairy subsidies could lead to retaliatory measures, threatening European exports.
Disease Outbreaks
Avian influenza in the US and bluetongue virus in Europe pose risks to production and supply chains.
Market Opportunities
1. Premium Dairy Products: New Zealand’s move toward specialty dairy products highlights opportunities for producers adapting to changing market trends.
2. Cheese Demand Surge: Both the EU and US are expanding cheese production capacity to meet growing domestic and export demand.
3. Sustainability Gains: Producers embracing eco-friendly dairy practices are better positioned as consumers prioritize sustainability.
Procurement teams will need to adapt their strategies to account for both the opportunities and risks presented by the evolving dairy market in 2025. Here are some best practices:
1. Monitor Geopolitical Developments
Keeping an eye on key political events, particularly US-China trade relations and EU regulatory changes, is essential for anticipating disruptions to supply chains and dairy exports.
2. Diversify Sourcing Strategies
To mitigate risks from disease outbreaks, regional production declines, or geopolitical uncertainties, procurement teams should consider diversifying their sourcing strategies. Relying on multiple regions and suppliers will help ensure stability and continuity in supply.
3. Form Strategic Partnerships
Building relationships with sustainable and value-added dairy suppliers can help align procurement strategies with emerging consumer preferences. This also positions businesses to capitalize on growing demand for specialty and eco-friendly dairy products.
4. Leverage AI and Data Analytics
Utilizing AI-driven forecasting tools will allow procurement teams to anticipate price movements, market trends, and potential disruptions, enabling more informed decision-making and enhanced procurement efficiency.
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