Global milk production is slowing after four consecutive quarters of above-2% growth. As Rabobank reports in its Global Dairy Quarterly Q2 2026, the market is moving toward rebalancing — but geopolitical risks and price volatility complicate the outlook.
Output growth peaked at 5.2% in Q4 2025. In Q2 2026, supplies are expected to be 1.5% higher year-on-year, before flattening in Q3 and declining by 1.6% in Q4. On a full-year basis, milk production is estimated to rise 1% in 2026 and decline slightly in 2027, supporting a rebalancing of global milk supplies.
The earlier supply surge has led to generally weaker prices, with trends varying by product. Global Dairy Trade index gains have been supported mainly by skim milk powder and whole milk powder, while cheese and butter remain below 2025 levels due to adequate supply. Farmer margins are contracting in some regions, particularly in the EU, as milk prices decline.
In most regions, rising input costs — energy, fertiliser and interest rates — are the most pressing concern, driving potential margin pressure into H2 2026 and 2027. Ongoing Middle East tensions and the Strait of Hormuz closure create uncertainty for oil prices, fertiliser availability and feed costs. Food price inflation is likely to rise and affect purchasing habits, though the “protein halo” continues to support dairy demand.
The full report is available to registered users on the Rabobank website.
