The global dairy market enters a new stage of transformation. The EU faces a reduction in profitability and intensifying competition. The US places its bet on scaling, digital technologies, and exports. New Zealand and Australia are ramping up production and investments in high-value-added products. The main drivers of the industry's development are becoming productivity, modern processing, innovations, and the ability of producers to adapt to new market conditions
Production and Demand
Europe. According to USDA data, milk production volumes in the EU remain relatively stable thanks to the growing productivity of cows despite the reduction in the number of farms and the cow herd. In particular, average productivity indicators in Estonia stand at 11,060 kg, and in Denmark – at over 11,000 kg. About 70% of milk in the EU is produced by six countries. The leader in terms of milk yield volume is Germany, in second place is France, and in 2025 Poland came out into third place, overtaking the Netherlands. The milk supply in most EU member states was sufficient in May, but extreme summer heat may affect the reduction of cow productivity and the decline in milk yield.
Eastern European countries are ramping up raw milk production. In particular, Poland remains one of the main drivers of milk production growth in Europe. The increase in cow productivity and the subsequent consolidation of farms allow for ramping up raw milk production despite the reduction in the cow herd. An increasingly larger share of milk is directed toward cheese production.
Tight environmental requirements, rising production costs, and the aging of farmers are pressing on European milk producers. Over the last 30 years, 4 million farms have closed in the EU. Analysts predict that by 2035, milk production in the EU may decrease by 10–15 million tons. In 2026, revenues per cow in the EU significantly decreased. If in Germany in 2025 the revenue per cow stood at around 1,800 euros, it now stands at 825 euros. This is the lowest indicator over the last 10 years. The low price of raw milk does not compensate for the costs of feed, energy, fertilizers, and other production resources.
Competition in the EU dairy market is becoming tougher as a result of concluding the trade agreement with Mercosur. The EU allowed 100 thousand tons of milk powder to be imported duty-free annually from Latin American countries. For the Ukrainian dairy industry, this means the appearance of a strong competitor in the EU market and additional pressure on the prices and margins of milk powder and butter. For comparison, Ukraine can import only 15.4 thousand tons of milk powder into the EU.
According to Rabobank data, raw milk production began to decline in the EU under the pressure of low procurement prices. If in the fourth quarter of 2025 the growth stood at 5.2% compared to the same period of 2024, in the second quarter of 2026 it may slow down to 1.5%, and in the third quarter zero growth is expected. By the end of 2026, a decline in milk yield volumes by 1.6% is predicted.
USA. According to clal.it data, in May the US produced 9.32 million tons of raw milk, which is 3% more relative to April 2026 and May 2025. In January–May 2026, milk yield volumes in the US stood at 44.96 million tons, which is 2.8% more than last year. According to USDA data, raw milk production in the US was at a satisfactory level to cover the existing demand. In 2025, the US significantly expanded raw milk production. Additional volumes of milk go to export. Almost 17% of raw milk in the US is used for the production of exchange-traded commodities that are exported to the countries of North America, Africa, the Middle East, and South Asia.
The seasonal demand for raw milk from ice cream producers is growing in the country. According to Get Fair Dairy data, the popularity of GLP-1 weight-loss drugs affects the growth in demand for dairy protein. These medicinal products suppress appetite, so people start eating less. At the same time, they need to receive a sufficient amount of protein to prevent the loss of muscle mass during weight loss. That is why the demand for products with a high content of high-quality protein is growing rapidly. In the US, the number of adults taking GLP-1 drugs increased from 5.8% at the beginning of 2024 to 12.4% at the end of 2025.
The US invests not in increasing the number of cows and not in the number of farms, but in expanding and scaling processing capacities, in the production of high-value-added ingredients, technologies and automation, sustainable development, ecology, innovative products, and new brands. In the US, the trend of enlargement and scaling of farms continues. In 2021, the largest dairy cooperative in the US, Dairy Farmers of America, united about 6.5 thousand farmers. Today, 4.6 thousand of them remain. Over the next five years, the number of farms may reduce to 4 thousand.
According to USDA data, the concentration of milk production in the US has reached an all-time high. In 2025, California, Wisconsin, Idaho, Texas, and New York produced over 50% of all milk in the country. Since 2004, the number of licensed dairy farms in the US decreased by 63%, while total milk production grew by 32%. Today, the development of the dairy industry increasingly depends not on the climate or land area, but on the availability of modern infrastructure for milk processing.
For example, the Top Deck Holsteins farm in the state of Iowa uses SenseHub electronic collars, which monitor cow activity in real-time. The PCDart computer system collects all production indicators, and the EZfeed system automatically ensures the precise preparation and distribution of feed. Computerized milking systems are used today in the production of 45% of all milk in the US. Previously, this indicator stood at only 20%. Embryo transfer technologies and the use of sexed semen are already applied by 96% of milk producers.
However, for the first time in the last 47 years, the US has the smallest number of heifers for technological herd replacement. There was a substantial demand for beef on the global market, and the US applied a beef-on-dairy strategy. Americans crossed beef breeds of cows with dairy breeds of cows with the aim of increasing the production of bulls for sale.
Oceania. According to clal.it data, in May milk production volumes in New Zealand stood at 1.02 million tons, which is 34% less relative to April 2026, but 3% more relative to May 2025. In January–May 2026, milk yield volumes in New Zealand stood at 8.91 million tons, which is 5.4% more relative to last year's period. According to the forecast of the Ministry for Primary Industries of New Zealand, a 4% growth in milk production is expected in the current year as a result of favorable weather conditions and high production profitability for farmers.
Weather conditions formed by the La Niña phenomenon brought higher temperatures and a larger than usual amount of precipitation to the Southern Hemisphere in summer. This contributed to better grass growth on pastures, helped maintain a sufficient level of dry matter in feed, and reduced the need to use additional feed during the hottest period of summer. It is in New Zealand where the highest indicators of fat and protein in milk are found. New Zealand earns on milk quality and high-value-added products. By 2035, New Zealand aims to get more profit from each kilogram of milk, making a focus on quality, innovations, dry matter, and deep processing.
New Zealand exports 95% of the produced milk. According to the Ministry for Primary Industries of New Zealand, in the current year the dairy industry's revenues may grow by 5% and reach a record 28.6 billion New Zealand dollars after the record result of last year. Most likely, the largest share of export revenue will be provided by whole milk powder (32%), dairy fats (21%), cheeses (12%), and casein and other protein products (11%).
The largest export market for New Zealand dairy products remains China, which accounts for 36% of exports. However, during the pandemic and lockdowns, China changed the architecture of the dairy industry. Based on the results of 2024–2025, China significantly reduced its cow herd, predominantly at the expense of small and low-efficiency farms. China places its bet on the enlargement of farms. Already 68% of all farms in China are represented by large enterprises with a herd of over 1 thousand cows. China places its bet on stabilizing milk production and the further consolidation of both farms and processing capacities.
The Danone company is consolidating its business in Australia and bought out a 49% stake of Saputo Dairy Australia in a joint venture, and also acquired the Australian company MADE Group, which produces healthy food products. It is planned to develop MADE Group brands in the markets of the Asia-Pacific region. As Dairy Australia reports, from July 2025 to April 2026, Australia increased milk exports to 139.82 thousand tons, which is 15.2% more than last year.
According to the Production Inputs Monitor Report, in May the amount of precipitation in most eastern regions of Australia significantly increased after a dry April. The most precipitation fell in the northern part of New South Wales and in southern Queensland, which partially compensated for the consequences of the prolonged drought. Although prices for key feed categories continued to rise. Due to dry conditions at the beginning of the month, a high demand for feed persisted in the northern dairy regions, while the growth in transportation costs and high global demand for wheat additionally supported the price increase. Australian farmers are pressured by high prices for fertilizers, including urea and diammonium phosphate.
Dairy Market Prices
Europe. According to preliminary data from the European Commission, in May 2026 the average price for raw milk in the EU stood at 42.53 eurocents per kg, which is 0.61% less than in April 2026. Relative to the price as of May 2025, milk in the EU became cheaper by 19.77%. The overproduction of raw milk in Europe in the second half of 2025 and in the first quarter of 2026 led to the appearance of a raw milk surplus on the market, which affected the reduction of butter prices and the accumulation of cheese inventories in Europe, which press on procurement prices. Pressure on the dairy sector is created by the spreading use of cheaper vegetable fats in the food industry, primarily palm oil, as a dairy fat substitute. Due to excessively high prices for butter in previous years, confectioners began to substitute the recipe of their products and use blends instead of butter.
USA. According to USDA data, in May 2026 the weighted average statistical uniform milk price in the US stood at 19.75 dollars per 100 pounds, which is 0.64 dollars more than last month, and 0.67 dollars higher than for the same period last year. An imbalance in the development of dairy cattle breeding may lead to the fact that by the end of 2026 the number of heifers will reduce in the US and the production of raw milk will significantly slow down. According to USDA estimates, this may affect the growth of milk prices.
Oceania. According to USDA data, the average procurement price in the current production season in New Zealand stands at 9.74 New Zealand dollars per kilogram of milk solids. The beginning of the season was accompanied by an increase in the use of additional feed and fertilizers by farmers. High procurement milk prices provided farmers with substantial financial opportunities for such investments and became an important factor in supporting the industry's development. According to the forecast of the Ministry for Primary Industries of New Zealand, the price for raw milk may rise to 9.85 New Zealand dollars per kilogram of milk solids.
The Saputo Dairy Australia company announced for its suppliers a starting weighted average procurement price for the 2026/2027 season in the amount of 8.80–8.90 Australian dollars per kilogram of milk solids. The actual procurement price for each farm may differ depending on individual milk characteristics and production features on a specific Australian farm. The company noted that they assess the prospects for improving the situation in certain markets with cautious optimism and plan to review milk procurement prices throughout the season in case of certainty regarding key markets and dairy product categories
Press service of the Association of Milk Producers
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