Milk Production Trends and Future Outlook
Rabobank’s latest report indicates that global dairy markets are moving towards a balance as the growth in milk production slows in the second quarter of 2026. The Q2 Global Dairy Quarterly from Rabobank reveals that global milk production growth began to decelerate after four consecutive quarters of expansion, peaking at 5.2 per cent by the end of 2025. Rabobank estimates global milk production will finish quarter two this year 1.5 per cent higher than last year, before flattening in quarter three and moving into decline by quarter four this year, estimated down by 1.6 per cent year-on-year.
Michael Harvey, a senior dairy analyst at RaboResearch, emphasised that the expected contraction in global milk production in the fourth quarter of 2026 would be the first decline since Q2 2024. On a calendar year basis, the bank says 2026 milk production is expected to be up one per cent following a gain of 3.1 per cent in 2025, while its initial expectations for 2027 are for a 0.2 per cent drop.
Factors Influencing Dairy Prices
Higher input costs and the challenging milk price situation are likely to affect the dairy market. Significant factors also include demand shifts, Middle East tensions, and consumer health trends. Weather conditions, particularly a strong El Nino, could impact milk supply in South America, Australia, and New Zealand, according to the report. Rabobank forecasts that the global milk production for 2026 will rise by one per cent, following a 3.1 per cent gain in 2025. However, a 0.2 per cent drop is expected for 2027, marking the first annual contraction since 2022.
Australian milk production trends vary by state. New South Wales and Queensland are performing strongly, but tighter farm margins and potential low rainfall could limit growth in the 2026/27 season. In southern Australia, the new season milk price ranges from AUD8.80/kgMS to AUD9.50/kgMS. This is slightly below expectations and could impact farm profitability. From July 2025 to March 2026, Australian dairy exports remained stable. Milk export growth was strong, but butter, butter oil, and cheddar exports declined. Global dairy markets face potential headwinds as they seek balance amid these challenges. The report suggests monitoring higher input costs, margin contractions, and the precarious milk price situation.
Last updated: 15 June 2026, 9:15 pm
