Instead of a usual cyclical downturn, the global milk powder market is undergoing an unprecedented structural transformation. According to experts at Bullvine Weekly, an atypical lull prevails in the market, and purchasing activity, particularly for commodity powders, has virtually disappeared. This is a sign of a profound shift in the "rules of the game."
All the world's "tigers"—the USA, Latin America, and New Zealand—are simultaneously increasing milk production for the first time in history, while demand is not growing. Market equilibrium has been disrupted.
The main player, China, is changing tactics: the country is investing in its own milk powder production capacity, reducing the import of cheap commodity products, and instead buying more cheese and high-protein ingredients. This means the market for low-margin milk powders may never return to its previous scale.
What about the US? Even if milk prices sharply increase tomorrow, American farms will not be able to respond quickly with increased production.
The reason is a severe shortage of replacement heifers. In recent years, many farms have actively used beef semen to sell calves at a higher price. Consequently, the number of heifers suitable for replenishing dairy herds has fallen to minimums last seen in the late 1970s. It will take a minimum of three years to restore the herd and increase the livestock population.
This jeopardizes the investments of American processing plants, which have injected over $11 billion into new capacities, relying on large volumes of cheap milk.
Consolidation or Niche
Amidst structural transformation, Bullvine Weekly experts forecast a decrease in the number of farms but an increase in their size. Only large enterprises or medium-sized farms that find their niche (cheese production, on-farm milk processing, direct sales, organic production) will be able to survive.
Who Will Survive in the New Reality
Market conditions are creating an opportunity for farm consolidation.
$\Rightarrow$ Financially stable farms are buying out neighboring businesses or entering into long-term contracts with processors for a fixed premium.
$\Rightarrow$ Less stable enterprises are advised to reduce costs by 10–15%, revise rations, consolidate feed purchases, insure profits, and actively work with banks.
$\Rightarrow$ Farms with high debt burdens (over 60%) are advised to exit the business while they can still preserve capital.
The global dairy market is entering a new era—where those who think strategically survive, not just those who produce more.