Summary
- Global milk oversupply continues into 2026, keeping pressure on dairy commodity prices despite a recent pick-up in buying activity.
- Processors are shifting milk into higher‑margin products like cheese and whey ingredients.
- Farmgate milk prices are falling across major regions, but not enough to curb production, with herd reductions expected.
Processors continue to grapple with record-high milk production as the global milk oversupply situation continues into 2026.
Almost all major regions are expanding production, particularly the US, the EU, New Zealand and parts of South America.
This has deepened the global dairy surplus which, coupled with weak demand over the last six months of 2025, has put pressure on some commodity prices.
But buying activity has increased in early 2026, offering hope that the surplus could be absorbed over time.
In the meantime, processors are likely to route milk into higher-value commodities, Maxum Foods’ John Hallo told us.
“Processors are likely to move milk into higher-margin commodities, such as cheese, whey protein ingredients, or specialty dairy ingredients.”
Butter and skim milk powder are currently offering the lowest margins for processors, he added.
Farmgate milk prices fall – but not fast enough
Processors globally have been slashing farmgate milk prices to slow production, but supply has continued to be strong into 2026.
With cull cow prices showing strength in multiple markets, farmers are expected to trim their herds.
“Average farmgate milk prices in Europe saw continued monthly decline, with November 2025 prices around €44.57 per 100 kg, down notably both month-on-month and on a rolling yearly basis, reflecting sustained pressure from oversupply,” Hallo said.
“In New Zealand, although Fonterra’s 2025/26 forecast still sits in a range of NZ$8.50–$9.50 per kg milk solids (kgMS), the midpoint has been trimmed from earlier forecasts (eg NZ$10/kgMS earlier in the season) as global milk flows have remained strong.
“In the US, official pricing mechanisms such as Class I base milk prices have fallen. Class I base skim milk was about $11.17/cwt in January, down sharply from the 2025 average, showing weakening milk price signals.”
An increase in culling from the dairy sector is unlikely to negatively impact cull cow prices, thanks to sustainable demand from the meat industry.
“Strong manufacturing beef demand could cushion price declines,” Hallo said. “Given prices in the wider beef market, there would be no downside to cull cow prices by potential oversupply.”
