According to the Ornua Global Dairy Market Report for October growth for 2027 is forecast to expand by a more modest +1%, although the real impact of El Niño is “currently unknown.”
With oil prices, inflation, and interest rates all rising, macroeconomic uncertainty is also a “considerable” factor.
The report said that milk flows have been better than anticipated, although growth in global milk supply should ease as the effects of the European drought and El Niño play out.
Collections increased by approximately +1.4% in August, with growth still observed in most major regions.
Despite these strong global milk supplies, European dairy markets remained relatively stable, it said.
In the EU, production rose by +1.1% in September, down from +2.5% in August. However, given the drought conditions, flows were better than expected.
This has resulted in the annual EU milk production forecast being revised back to pre-drought levels to +1.9%.
In the US, milk volumes rose by +1.7% in July and August, with the annual forecast still projecting a +2.2% lift. Strong beef prices and new cheese processing capacity remained the primary drivers of the expansion, the report said.
In New Zealand milk flows rose +2.4%, with solids up +3.4% but at the current growth rate it could rise by +4% or more.
In South American favourable conditions boosted output in major producers such as Argentina, Brazil and Uruguay.
The report said: “Global flows are expected to continue expanding, albeit at a slower pace in the fourth quarter. The full impact of weather-related supply disruptions is unlikely to emerge until early next year.”
Butter production in the EU increased in July and August with exports strong, driven by the US, China, and Turkey.
Drought concerns, historically low prices, and seasonal activity supported the market in August and early September. However, in the UK Production has slowed in recent months, although string exports have provided some support.
In the US, butter supply has been robust with domestic usage and strong exports meaning stocks remain at low levels.
