According to the Agriculture and Horticulture Development Board (AHDB), global dairy markets showed signs of recovery at the beginning of 2026 after a prolonged period of declining prices, although the situation for milk producers remains uncertain.
After several months of falling milk prices driven by lower dairy commodity values, February brought the first signals of market recovery. In particular, early in the year Global Dairy Trade auctions recorded five consecutive price increases, indicating a shift in sentiment across global dairy markets.
A similar trend has been observed in the European market. In the United Kingdom, wholesale prices for skim milk powder (SMP) and Cheddar cheese began to rise in January, with the upward movement strengthening in February. Although the increases remain moderate, they signal renewed demand following a period of depressed prices.
One factor supporting the rise in SMP prices has been buyers returning to the market after prices reached what they considered a floor level. Additionally, European dairy products have become more competitive globally compared with suppliers from the Southern Hemisphere, which has stimulated export demand.
Geopolitical developments may also influence market dynamics. Rising tensions in Iran, previously a significant exporter of SMP, could potentially disrupt supply flows to markets in the Middle East and South Asia, prompting importers to seek alternative suppliers.
At the same time, structural shifts are occurring in global dairy processing. In the United States, milk processing is increasingly focused on cheese, yogurt, and whey-based ingredients, rather than traditional commodities such as milk powder and butter. Rising whey prices are also encouraging partial substitution toward casein-containing milk powders in food manufacturing.
Despite the recent recovery, analysts stress that the improvement represents short-term relief rather than a sustained recovery for dairy farmers. Market indicators, including AMPE and MCVE, increased by about 4% compared with the previous month, which may help stabilize or slightly increase farmgate milk prices over the next two to three months.
However, high milk production volumes, limited processing capacity, and the approaching seasonal spring peak in milk yields are likely to continue putting pressure on margins. As a result, experts expect continued volatility in global dairy markets.
Source: Agriculture and Horticulture Development Board (AHDB)
