Global dairy quarterly Q1 2026 | A delicate dairy balance: Cautious price recovery amid heavy supply

Global dairy markets continue to be well supplied, with strong milk production growth across all major exporting regions except Australia. This growth has been supported by relatively low feed prices, which have encouraged output and kept supply levels elevated worldwide.

The abundant milk supply has had a pronounced impact on dairy prices. Fat markets have been hit the hardest, with prices falling by more than 40% from September to February. Whole milk powder (WMP) followed a similar trajectory, declining by around 30% over the same period. Protein markets, including skimmed milk powder (SMP), cheese, and whey, have been more resilient, recording price declines of roughly 15%. Whey prices have even continued to rise, supported by strong demand for high-protein products.

More recently, the market has shown tentative signs of recovery. Several consecutive increases in Global Dairy Trade (GDT) auctions, as well as firmer outcomes in GDT Pulse events, have lifted sentiment. However, current supply data does not yet indicate that this upward move is structurally sustainable. Milk production in the EU, the US, South America, and New Zealand remains well above last year’s levels, and although the rate of growth is gradually returning to normal, the market is still flushed with dairy products. Even so, after an extended period of price declines, it is reassuring for market participants to see that prices are capable of moving higher again.

As farm margins come under increasing pressure and favorable year-over-year comparisons fade after Q1, the market is expected to tighten gradually. Output from the Big 7 exporters is forecast to end 2026 up 0.2% YOY, following an increase of 2.6% in 2025.

This outlook is driven largely by softening supply growth in South America, Australia, and China. In Europe, milk production is expected to decline by 0.9%, with the impact becoming more visible later in the year, particularly for butter and SMP. This decline is partly offset by the US, where farmer margins are supported by high beef prices, suggesting that milk production growth will continue through this year. In the US, output growth will continue to be directed toward cheese, especially mozzarella and cheddar, as well as whey.

While economic conditions in key importing regions, particularly Asia, remain supportive of continued dairy imports, ongoing geopolitical instability, including tensions involving Iran, Ukraine, and other regions, could quickly and temporarily disrupt global market balances. As the Middle East is an important import market for milk powders, fat-filled powders, and evaporated milk, the market will follow the evolving situation in Iran and possible trade disruptions closely.