Dairy market fundamentals have weakened with prospects of stronger EU milk supplies in the coming months.
Rising milk production, weak demand in export markets, and faster-than-expected growth in EU butter inventories are adding pressure.
The increase in EU milk supplies is driven by favourable milk prices, limited disease outbreaks, changes in calving patterns, and abundant low-cost feed. By avoiding over-production of cheese, cream and skim solids supplies are plentiful, butterfat imports are rising, and EU exporters are losing cheese export market share.
The US market remains oversupplied, with 2.1 per cent more dairy cows in the herd compared to June 2024, pushing milk production higher. Labour market pressures, persistent inflation, and reduced consumer demand continue to weigh on dairy consumption. Low butter prices may encourage domestic demand and support exports.
With good pasture conditions and sustained high milk prices, New Zealand is experiencing another strong season start in 2025/26. This presents choices for product mix considering the changed market conditions.
Global trade is expected to expand at low prices despite geopolitical and tariff uncertainty. Recent growth has been driven by demand for cheese and fats, particularly in developed markets able to absorb higher prices.
The Q4-25 BOM rainfall outlook has shifted, showing weaker conditions across eastern Australia, though rainfall is still expected to be mostly above average. Temperatures are forecast to be above average in most regions.
Fodder prices in southern Australia are likely to remain under pressure, with an oversupplied grain market encouraging more marginal crops to be baled.
Cow culling continued strongly, rising 37 per cent in seven months to July. July recorded the highest monthly turn-off in more than three years, as cull cow prices rose sharply.
Freshagenda forecasts a 2.2 per cent fall in milk solids production in 2025/26, with a lower spring peak due to reduced cow numbers.