Global Dairy Markets Heading Towards Balance

A new report by Rabobank suggests global dairy markets are heading back towards supply and demand balance as milk production growth begins to slow after a period of rapid expansion.

The bank's latest Global Dairy Quarterly report says global milk production growth peaked at more than five per cent at the end of 2025, following four consecutive quarters of strong increases. However, growth is now beginning to moderate.

Rabobank expects global milk production to finish the current quarter around 1.5 per cent higher than a year ago, before flattening in quarter three and moving into decline by the end of 2026.

The report says higher input costs, tighter farm margins and uncertainty around milk prices are likely to weigh on production in the months ahead.

It also identifies demand shifts, ongoing tensions in the Middle East and the potential impact of an El Niño weather pattern as key factors that could influence global dairy trade and pricing.

For Australia, Rabobank senior dairy analyst Michael Harvey says milk production has entered the new season with some momentum, but tighter margins and the prospect of lower rainfall could constrain future supply growth despite strong performances in New South Wales, Queensland and Tasmania.