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The United States Department of Agriculture (USDA) forecasts a 2.7% increase in Australian cheese production to 375 thousand metric tons (mt) in 2025, up from 365 thousand mt for 2024. This would be the third-highest level of cheese production, matching the 2023 peak. The increase is driven by a slight rise in milk production, with cheese accounting for 35% of total fluid milk production. Over the past decade, processors have focused more on cheese at the expense of other dairy products, with this product becoming the largest use of milk in Australia.
Australia’s cheese production is expected to decline slightly to 365 thousand mt, reflecting a 2.7% drop from 2023, with a 7% year-on-year (YoY) decline in the first half of 2024. However, with milk production rising in 2024, processors are expected to prioritize cheese production in the second half of the year. The industry has shifted towards producing more semi-hard cheeses, reducing cheddar output to increase value from available milk.
Butter prices in Canada have risen by 50% over the past four years, driven by inflation and changing demand patterns. To meet the demand for higher milk fat content, Canadian farmers have been feeding their cows palm oil, leading to a 40% to 50% higher payment for milk fat. However, Canada is facing a milk shortage, which is affecting butter production. As a result, the product has become increasingly valuable, even attracting criminal activity. In 2024, there have been multiple reports of butter thefts in cities like Guelph and Brantford. The stolen butter is suspected to be sold on social media or to businesses like restaurants and bakeries, which are grappling with rising ingredient and operational costs.
In response, grocery store owners are considering stronger security measures, which could further drive up butter prices and make black market sales more attractive. Canadians now refer to butter as "yellow gold," with a 454-gram package rising from USD 3.90 in Sep-19 to USD 5.49 in Sep-24. This highlights the growing pressures on the Canadian butter market, including production shortages and increasing criminal activity.
Russia's dairy exports surged in 2024, generating USD 370 million in revenue during the first 11 months, a 20% YoY increase. Cheeses and cottage cheese dominated, contributing over 30% of export earnings, while other key categories included fermented milk products (22%), ice cream (14%), powdered milk (11%), and milk and cream (9%). Export volumes also grew significantly, with cheese and cottage cheese rising 23% YoY to 27 thousand mt, powdered milk up 31% YoY to 18 thousand mt, and ice cream expanding 11% YoY to 14 thousand mt.
Traditional markets like Kazakhstan, Belarus, and Uzbekistan remained top buyers, but China emerged as a key partner, boosting imports by 70% to USD 16 million, with notable increases in powdered milk, cheese, and ice cream. Russia's dairy trade also expanded in non-Commonwealth of Independent States (CIS) countries, including Algeria, Egypt, and Saudi Arabia, where whey powder exports rose 67% and milk powder grew 26%.
The National Union of Milk Producers (Soyuzmoloko), a leading organization in Russia's dairy industry, predicts a 15% YoY increase in overall dairy exports in 2024, with projections of USD 700 million in export revenues by 2030. Despite the ongoing conflict, Russia's evolving "war economy" and strategic partnerships, particularly with China, are driving the expansion of its dairy sector on the global stage.
The National Dairy Council announced a 17% increase in the recommended sales price of raw cow milk, setting it at USD 0.49 per liter (TRY 17.15/liter), effective January 1, 2025. This marks an increase from the previous price of USD 0.42/liter (TRY 14.65/liter). This price applies to milk with 3.6% fat and 3.2% protein content, with adjustments of ±25 cents for every 0.1% variation in these ratios. Producers will receive additional payments for cooling, transportation, and other expenses they cover. The council also confirmed that raw milk prices will be re-evaluated quarterly to reflect market changes.
Despite current challenges, the USDA projects growth across all dairy product categories in the United States (US) over the next decade. Cheese prices are at their lowest level since Apr-24, and butter prices have remained stable since Oct-24 after a decline from their Aug-24 peak. In contrast, skimmed milk powder and whey powder prices have risen, with premium skimmed milk powder reaching its highest level since Nov-22. These price increases in powdered products have helped prevent a significant decline in the prices of grades III and IV milk despite weaker butter and cheese prices. However, milk production has not recovered as expected, and demand has fallen short of predictions, straining the butter and cheese markets.
Looking ahead, the USDA forecasts steady growth in milk production and cow population by 2034, with milk output expected to rise from 225.8 billion pounds (lbs) in 2024 to 253.1 billion lbs in 2034. This will be driven by higher milk yields per cow, projected to increase to 26.63 thousand lbs by 2034. Prices for cheddar cheese are expected to rise, while whey powder and nonfat dry milk will also see modest increases. However, butter prices are projected to remain lower. While price growth is expected to be modest, increased market volatility due to global supply-demand shifts and political factors could present opportunities for farms to capitalize on favorable market conditions.
The USDA has launched a National Milk Testing Strategy to combat the spread of highly pathogenic avian influenza (H5N1) in dairy cattle. The initiative includes a federal order requiring raw milk sample collection and testing nationwide. The exercise began on December 16 in six states: California, Colorado, Michigan, Mississippi, Oregon, and Pennsylvania. Key provisions include mandatory raw milk sample sharing, epidemiological reporting for positive cases, and mandatory reporting of positive test results by veterinarians and laboratories.
The strategy employs a five-step approach: inventory monitoring of milk storage areas, targeted sampling to identify infected livestock, biosecurity, and movement controls in affected states, regular testing in H5N1-free regions, and long-term national sampling to confirm eradication. The Agriculture Secretary emphasized the program's role in safeguarding dairy herds and the milk supply while empowering farmers with tools to manage and eradicate the virus.
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In W51, Germany's milk prices surged by 10.89% week-on-week (WoW) to USD 3.87 per kilogram (kg), marking the third consecutive weekly price increase. This rise also reflects a significant 51.17% month-on-month (MoM) increase and a 13.82% YoY increase. The price surge is primarily driven by reduced milk production, which has been impacted by a decline in the cow herd. According to Germany's Federal Office for Agriculture and Food, the number of cows in Thuringia has decreased by 1.5% YoY as of November 3. Over the past six months, the dairy cow population dropped by 2.6% YoY, reaching 79,038 cows. This price increase is further attributed to the seasonal decline in milk yields, which typically leads to tighter milk supplies and higher prices during this period.
Belgium's milk prices averaged USD 3.95/kg in W51, marking a slight 0.5% WoW drop and a 13.19% YoY decrease. However, the price remains 0.77% higher than the previous month, as it has remained relatively stable for the past eight weeks, fluctuating between USD 3.90/kg and USD 3.97/kg. This price stability can be attributed to steady demand, which has supported minor fluctuations in the rate. The YoY decline is likely due to the lower exchange rate of the euro against the US dollar this year.
In W51, milk prices in the Netherlands averaged USD 2.20/kg, maintaining stability for the third consecutive week. While this reflects a 0.46% MoM increase, it marks a 12.35% YoY decrease. The price stability over the past three weeks suggests a balanced demand-supply situation. However, the significant YoY drop points to an oversupply of milk this season, exerting downward pressure on prices. In response, the Dutch government has raised concerns about the surplus, prompting dairy organizations to propose a voluntary buyout scheme. This initiative would allow farmers to reduce their herds by 10% to 20% over three years in exchange for government compensation, aiming to restore balance and stabilize prices in the long term.
Milk prices in France averaged USD 3.22/kg in W51, reflecting a 3.88% WoW drop, a 7.47% MoM decline, and a 1.53% YoY decrease. This decline signals a return to more balanced market conditions after a period of high prices driven by tight supply. French dairy farmers delivered 1.1% more milk in Oct-24 compared to the same period in 2023, contributing to a 3% YoY increase in total milk supply for the year. As production levels normalize, the market is stabilizing, leading to a price correction.
Poland’s milk prices reached USD 3.38/kg in W51, marking a 6.62% WoW increase, a significant 39.67% MoM rise, and a 21.58% YoY uptick. This price hike is driven by several factors, including strong demand for milk and a bluetongue outbreak in Southern Poland. Additionally, ongoing drought conditions in Central and Eastern Europe have strained feed supplies, further impacting production. A decrease in overall European Union (EU) milk production, expected to fall by 0.2% YoY in 2025, is also contributing to higher prices in Poland. The combination of reduced cow populations, low farmer margins, rising production costs, and environmental regulations, particularly in the context of climate protection policies aimed at reducing greenhouse gas emissions, is expected to keep milk prices elevated in Poland for the near future.
To leverage the forecasted 2.7% YoY increase in cheese production in 2025, Australian dairy processors should continue prioritizing cheese production, especially semi-hard cheeses, which have shown greater profitability. Given the expected rise in milk production and the trend toward cheese becoming the largest milk product, processors can invest in technology and processes that improve efficiency. Expanding cheese product lines, targeting premium markets, and exploring new export opportunities, especially with neighboring countries and high-demand regions like Asia, will be crucial for maximizing growth.
With the 50% rise in butter prices, Canadian dairy producers must focus on improving butter production efficiency to mitigate shortages. Investing in alternative feed sources to reduce the reliance on palm oil and diversifying production could stabilize supply. Furthermore, implementing stronger security measures in collaboration with local authorities and exploring packaging innovations to protect butter during transit will help alleviate pressures. Additionally, collaborating with retail chains to introduce cost-effective butter alternatives could address consumer demand without sacrificing quality.
Russia’s dairy export growth, particularly in cheese, ice cream, and powdered milk, presents significant export opportunities. To further strengthen the export market, Russia should focus on increasing dairy exports to growing markets like China, Algeria, and Egypt. Investment in improving product quality and diversifying offerings, including organic and premium products, could capture higher value markets. Establishing more robust logistical networks and partnerships with non-CIS countries will help mitigate risks related to trade instability and boost long-term growth.
Sources: Tridge, Agronews, Haber7, Milknews, MilkUA, The Cattle Site
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