Key takeaways
- Global milk supply exceeds demand, pressuring dairy prices.
- GDT index down 4.3%; butter prices slump 12.4%.
- US butter exports surge, impacting EU and NZ markets.
- Milk production strong across all major regions into 2026.
Milk supply continues to exceed demand globally at the end of 2025, putting pressure on prices.
The Global Dairy Trade price index fell 4.3% at the latest event as bearish sentiment continues to guide market direction.
With mostly WMP and SMP sold at the latest auction – which is considered a barometer of global sentiment – most product categories saw price declines, led by a 12.4% slump in butter. Cheddar (+7.2%), lactose (+4.2%) and buttermilk powder (+1.8%) were the only categories in positive territory.
Butter prices at GDT auctions have been in decline since May, having climbed to their highest point in five years.
Regarding the double-digit price dip in December, RaboResearch’s senior dairy analyst Lucas Fuess told us: “A critical component here is the butter price disparity between regions. The US butter price has been well below the EU and NZ price throughout all of 2025. This has driven global buyers to procure product from the US instead of other regions to recognize the value in US product. US butter exports could see a record year in 2025 once all the data is in, and in some months have been more than double prior year levels.
“The ability of global buyers to source cheaper product from the US has pressured EU and NZ prices in recent months, leading to those declines.”
Milk production – which has been forecast to remain strong in the second half of 2025 and into 2026 – still exceeds demand, and measures such as reduced farmgate milk prices are not yet drastic enough to reverse the trend.
“Milk output is growing in all key exporting regions, which is not common,” Fuess told us. “Typically, at least one part of the world is dealing with a limiting factor that is reducing milk growth – either weather, disease, margins, or something else. Now, the US, EU, New Zealand, and South America are all seeing growth – simultaneously.
“Milk prices have declined in the US but total dairy farmer income likely remains higher than the cost of production for most farmers, meaning there has not yet been a strong enough price signal to tell farmers to cull cows or cut production.”
RaboResearch anticipates production gains in the US will continue throughout 2026. But RaboResearch estimates that the EU will slip into contraction next year, lessening the current oversupply situation.
“Regardless of how each regions shakes out, it will be important that demand is as strong as possible to absorb the additional growth the world in sum will see into 2026,” Fuess said.
“While volatility is never gone from the market, it is unlikely that US milk prices will see significant growth in 2026 due to the continually growing production.”
