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Global dairy commodity prices are rising despite record milk production across key exporting regions, according to Maxum Foods' March 2026 Global Dairy Commodity Update.

Milk solids output in the EU, US and New Zealand reached an all-time high in 2025, adding almost as much additional supply as the previous four years combined. Production growth has continued into early 2026, yet commodity prices are recovering from recent lows.

The market rally is currently being driven by short-term demand and uncertainty rather than tight supply, raising questions about whether prices could soften as the Northern Hemisphere approaches its seasonal spring flush.

EU output remains strong

Milk production growth in the EU remains robust and is expected to increase further as seasonal output rises. However, spot milk prices remain low, with processing plants reportedly operating at capacity.

Processors are prioritising the production of skimmed milk powder and butter, while farmgate milk prices appear to have stabilised close to breakeven levels. It remains unclear whether this will be sufficient to slow milk supply growth in the coming months.

Mixed signals in major markets

In New Zealand, milk supply is declining seasonally but continues to exceed expectations, supported by profitable milk prices and strong imports of supplementary feed. Strong performance on the Global Dairy Trade platform has prompted Fonterra to raise its forecast farmgate milk price for the 2025-26 season.

Meanwhile, US milk production in January came in below expectations, although the national dairy herd continues to expand. Demand indicators remain mixed, with weak pizza sales and store closures among major chains weighing on consumption. However, the US Department of Agriculture’s announcement of Section 32 food purchases is expected to provide some support to demand.

In addition, the global dairy trade reached a record high in 2025. A large exportable surplus during the second half of the year, combined with a weaker US dollar, helped boost shipments despite ongoing trade tensions and geopolitical uncertainty.

Australia outlook uncertain

Australia also recorded stronger-than-expected milk supplies in December and January. However, weather conditions could affect production in the coming months, with forecasts indicating below-average rainfall across most of southern Australia between March and May, alongside above-average daytime temperatures.

At the same time, water prices are close to a six-year high, while feed costs have remained relatively stable. Saleyard transactions of culled dairy cows increased 13% year-on-year during the July-January season-to-date period, although January volumes alone were down 28% compared with the same month last year.

For the 2026-27 season, the estimated commodity milk value is projected at A$7.70 (approx. $5.40) per kilogram of milk solids, with higher commodity prices offset by a stronger Australian dollar.

While the milk price outlook for the next season remains uncertain, processors looking to expand supply may need to offer a market premium to attract additional milk.