Nearly all dairy regions experienced an atypical increase in milk yields, which led to a rise in global milk production volumes. According to calculations by Daily Dairy Report analyst Betty Berning, this year, the global market saw an estimated 1.68 million tonnes of surplus raw milk, which is enough to produce an extra 168 thousand tonnes of cheese or 68–91 thousand tonnes of butter. Despite increased demand for dairy products in developing countries, this year's milk yield volumes in key dairy regions exceed the export markets' capacity to absorb them. Surplus milk and commodity stocks are putting pressure on procurement prices. Raw milk production growth is expected to continue until the end of 2025, pending measures to correct the situation in producing countries.
Production and Demand
Europe
According to AHDB data, the EU increased raw milk production in the first half of 2025, which led to increased dairy product manufacturing. AHDB reports that the rise in yields occurred in the second quarter (+0.06%). According to Dairy Herd, milk volumes grew by +0.8% in July compared to July 2025. Among European countries, Ireland (+7.4%), Lithuania (+1.2%), and the Czech Republic (+2.1%) showed the largest increases in milk volume between January and August 2025. Although the increase in EU yields was insignificant, even this small rise in production led to a surplus supply of milk powder, cheese, and butter on the market. This occurred amid a decrease in EU dairy export volumes in the second quarter (-2.7%) due to weaker demand in China, the Middle East, North Africa, and some other Asian countries.
The decline in EU dairy export volumes was influenced by higher prices for European-produced whole milk powder, which is more expensive than offers from suppliers in other regions. Increased imports also contributed to the rising butter supply in Europe. New EU-US trade agreements require Europeans to purchase up to 20,000 tonnes of duty-free dairy products, including butter, from the US annually. Surpluses of unsold commodities are restraining the growth of raw milk procurement prices. Farmers are being forced to reduce herd sizes and production to stabilize the price situation amid rising production costs and stricter EU requirements regarding fertilizers and cow comfort. Specifically, according to clal.it, EU milk production decreased to 12.38 million tonnes in August 2025, which is 2.4% less than July (+3.6% compared to August 2024). Over the first eight months of 2025, EU milk volumes amounted to 99.96 million tonnes, nearly equaling last year's figures (-0.1%).
Analyst Betty Berning suggests that raw milk producers may leave the industry or retire under pressure from stricter EU requirements. For instance, according to the Irish agricultural agency Teagasc, annual costs for keeping an average cow in Ireland have increased by 460 euros since 2021, and the revocation of the Nitrates Derogation could lead to a 39% reduction in family farm incomes, potentially forcing hundreds of dairy farms to close. The "Nitrates Derogation" is an EU permit to increase the limit for applying manure per hectare beyond the standard 170 kg of nitrogen, provided environmental requirements are met. However, the European Commission forecasts a 0.15% increase in EU milk volumes in 2025, with the reduction in cow numbers expected to be compensated by increased yield per cow.
United States
According to clal.it, 8.85 million tonnes of raw milk were produced in the US in August 2025, which is almost consistent with July figures (-0.3%) but 3.7% more than August 2024. From January to August 2025, milk volumes in the US amounted to 70.17 million tonnes, a 1.7% increase over the same period last year. According to USDA data, milk production is growing or remaining stable in most states, influenced by cooler and more comfortable weather for cows. Demand for raw milk is active from butter and cheesemakers preparing for increased demand ahead of autumn (Thanksgiving) and winter holidays (Christmas, New Year's), as well as due to existing demand for US dairy products in export markets, which are cheaper than New Zealand and European goods. However, demand for cream among manufacturers is gradually decreasing, and the raw material supply is significant, impacting prices.
According to the International Dairy Foods Association (IDFA), US dairy producers are responding to the rapid growth in demand for their products and plan to invest over $11 billion in new production capacities and the expansion of old facilities across 19 states. US milk production is expected to increase by 15 billion pounds (6.8 million tonnes) by 2030 to meet demand. US dairy exports are also rising, as buyers and consumers in South and Central America, Southeast Asia, and the Middle East spend their higher incomes on available American dairy products. By product category, the leading areas for planned investment are cheese ($3.2 billion), milk and cream ($2.97 billion), yogurt and fermented products ($2.81 billion), butter and dry milk ingredients ($1.6 billion), and ice cream ($530 million).
Dairy Herd reports that American milk producers are currently earning additional income from high prices for cull cows and calf sales, which partially offsets the rising costs of feed, labor, and herd replacement. Although the margin under the Dairy Margin Coverage program remains relatively high, USDA forecasts indicate a decline to $9.80 per hundredweight next year. This means that producers can continue to increase production until profitability sharply declines. American farmers may feel significant pressure if the average price of raw milk in the US drops to $16 per hundredweight (about 15.20 euros per 100 kg), which would lead to a significant decrease in cheese, butter, and milk powder prices on exchanges.
Oceania
According to clal.it, milk volumes in Australia amounted to 662 thousand tonnes in August 2025, which is 19% more than July but 2.9% less than August 2024. According to Dairy Herd, among the major dairy exporters, only Australia has reduced its milk volume. clal.it reports that Australia produced about 4.87 million tonnes of raw milk from January to August 2025, which is 3% less than the same period last year. The Stock Journal reports that the reduction in milk yields on the Green Continent is due to drought in the states of Victoria, South Australia, and Tasmania. The drought led to a reduction in the number of dairy cows, decreased feed supply, and lower productivity. Rising production costs are forcing farmers to leave the dairy sector and switch to beef production, which is considered a more profitable business among Australians amid high red meat prices in export markets.
clal.it reports that milk volumes in New Zealand amounted to 1.44 million tonnes in August 2025, which is 363% more than July and 1.8% more than August 2024. From January to August 2025, New Zealand's milk volumes totaled 10.47 million tonnes, a 1.4% increase over last year. The Dairy Companies Association reports that New Zealand's milk volumes broke records in August due to high raw milk prices, available cow feed, and more pasture than in previous years. High procurement prices allowed farmers to offset rising production costs due to the increased price of fertilizers, electricity, and logistics. The NZX Milk Production Predictor forecasts another increase in New Zealand's milk volumes in September due to growth in the Waikato and Taranaki regions.
According to Finimize, increased production and exports from the US and New Zealand are intensifying global market competition. Demand from Asia, especially China, is helping to offset the bearish trend in other regions. Declining Australian milk production and slowing procurement activity in the Middle East and Africa could lead to price fluctuations.
Dairy Market Prices
Europe
According to the European Commission, the average price for raw milk in the EU was 53.23 euros per 100 kg in August 2025, which is 0.8% more than July 2025. Significant growth in EU procurement prices likely did not occur due to the decline in global butter prices and the increase in commodity supply resulting from reduced exports. In the future, the growth of raw milk prices in Europe may be constrained by the increasing import of cheaper American butter.
United States
According to the USDA, the price of raw milk in the US was $20.90 per hundredweight (about 39.56 euros per 100 kg equivalent) in August 2025, which is 10 cents higher than July but $2.70 cheaper than August 2024.
Oceania
According to the Milk Value Portal, procurement prices in Australia for the 2025/26 season are expected to range from 8.90 to 9.20 Australian dollars per kg of milk solids. clal.it reports that the price of raw milk in New Zealand was 38.54 euros per 100 kg in August 2025, which is 1.26% less than July but 2.04% more than August 2024. The weakening of the procurement price was likely influenced by record yields in New Zealand.