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Dairy production costs rose globally by an average of 14% from 2019 to 2024, significantly affecting margins and retail prices, with most of the increase occurring since 2021. Factors driving these increases included feed and fertilizer price hikes, caused by the Ukraine war, extreme weather, rising energy costs, and other supply chain issues. Feed, the largest cost component, rose by 19%, accounting for at least 48% of production costs in many regions. Labour costs also surged due to low availability and higher wages. However, cost relief emerged in 2024, driven by better weather, improved yields, and reduced interest rates, particularly easing feed and fertilizer prices. Despite regional variances, including California’s lower feed costs and China’s push for domestic feed production, there might be continued high and variable costs in the coming decade, with efficiency-focused producers likely to fare better in market fluctuations.
Brazilian Agricultural Research Corporation Dairy Cattle (Embrapa Gado de Leite) expects an increase in milk prices for Brazilian producers at the start of 2025. In 2024, Brazilian milk prices began to recover due to improved global prices and lower grain costs, setting a positive outlook for the start of 2025. Despite domestic milk prices being 9% to 27% lower than international prices in recent years, Brazil's milk collection grew by 4% in the last quarter of 2024. This, along with lower grain costs, contributed to a favorable pricing trend for 2025. However, the sector remains vulnerable to macroeconomic instability, which could slow demand and pressure prices in the second half of 2025.
The reduced milk production in the European Union (EU) will force processors to prioritize cheese production, driven by stable domestic consumption and strong demand. In 2025, total EU milk exports are expected to fall by 0.2% to 149.4 million metric tons (mmt) due to lower cow numbers, farmer profitability challenges, and environmental restrictions. Despite this, cheese production is projected to rise by 0.6% to 10.8 mmt, supported by higher incomes and a recovering hospitality sector. EU cheese exports are set to reach 1.4 mmt (+0.4%), with key markets including the United Kingdom (UK), the United States (US), Japan, and Switzerland. Meanwhile, butter production is expected to decline by 1% to 2.1 mmt, as milk supply shifts toward cheese production.
French milk production increased by 1% in 2024, reaching approximately 23 million liters (L), following three years of decline. This growth, however, shows regional variations, with decreases in the south and east, likely due to the outbreak of blue tongue disease. The increase in production allowed the sector to boost exports by 9% in volume and 2.5% in value. Despite inflation, dairy products have performed well in the market, driven by increased purchases of cream and cheese.
India’s dairy market is projected to grow at a 7.13% compound annual growth rate (CAGR), reaching USD 1.22 billion by 2027, driven by rising milk production, increasing per capita consumption, and expanding export potential. Despite being the world’s largest milk producer, India’s share in global dairy trade remains modest, with key export markets including Turkey, UAE, and Egypt. The market is segmented into fluid milk (65%), ghee, yogurt, butter, cheese, and baby food, with premium dairy segments growing. Government initiatives to enhance processing and cold chain infrastructure are expected to boost exports and align quality with global standards.
Milk procurement prices in Ukraine continued to decline in late Feb-25 due to weak domestic demand and unprofitable production of key dairy exports like skimmed milk powder and butter. As of February 24, the average price for three milk grades was USD 0.41/kg (UAH 16.6/kg). Retail promotions in March may boost demand, limiting further price drops until May. Future trends depend on the EU’s trade policy, as reverting to 2016 tariff quotas could reduce exports, increase domestic supply, and weaken prices. Currently, 30 to 35% of processed raw milk is exported as finished dairy products.
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In W9 2025, German milk prices stood at USD 4.63/kg, reflecting a 0.22% week-on-week (WoW) decline due to currency fluctuations. Despite this minor weekly dip, prices surged 27.9% month-on-month (MoM) and 20.57% year-on-year (YoY), indicating a strong upward trend. The sharp annual rise is driven by tightening supply conditions and lower cow population, reducing overall milk production. Additionally, unfavorable weather has impacted feed availability and yields, further straining supply. The market has also faced disruptions from Foot-and-Mouth Disease (FMD) and African Swine Fever (ASF), which have pressured the supply availability down and sustained the price surge.
In W9, Belgian milk prices fell to USD 3.75/kg, down 1.06% WoW as the market adjusted after W8 gains, reflecting ongoing volatility that contributed to a 1.35% MoM increase. However, prices remain 25.15% lower YoY, driven by weaker demand and rising seasonal milk production, with cooler temperatures improving yields and easing prior supply chain pressures. In 2024, tight supply due to bluetongue disease initially supported higher prices, but better production currently keeps prices lower. Looking ahead, stable production and improved exports could support prices, though market fluctuations remain a key factor.
In W9, Dutch milk prices rose to USD 2.24/kg, up 0.90% WoW, continuing a 3.23% MoM increase and marking a 20.43% YoY surge. This sustained upward trend reflects tightening milk supplies both in the Netherlands and across Europe, maintaining higher price levels despite recent market fluctuations. Domestic production remains below seasonal averages of previous years, signaling persistent supply constraints. Additionally, unfavorable weather conditions have negatively impacted dairy yields, further limiting output. With supply challenges ongoing, prices are likely to remain elevated in the near term.
In W9, French milk prices climbed to USD 3.15/kg, rising 3.96% WoW and 6.78% MoM as the market adjusted to tightening milk supply across Europe. This supply constraint has driven higher demand, sustaining upward price momentum despite recent fluctuations. However, prices remain 5.97% lower YoY, reflecting a 1% increase in French milk production in 2024 to 23 million L, marking a recovery after three years of decline. While short-term price gains are evident, the higher production levels from last year continue to moderate long-term price trends.
With the EU shifting milk production toward cheese due to lower supply, other dairy-producing regions should assess similar opportunities. Processors in South America and Asia could expand cheese production to meet rising global demand, while butter and skimmed milk powder manufacturers should prepare for potential shortages in the EU.
Global dairy production costs have eased in 2024, particularly in feed and fertilizer. Producers should use this period to invest in efficiency improvements, such as automated milking systems and sustainable feed solutions, to build resilience against future cost spikes.
Recent price fluctuations in Europe and South America highlight the need for robust risk management. Dairy exporters should explore futures contracts and price hedging strategies to stabilize revenue amid shifting supply dynamics and currency fluctuations.
Sources: Tridge, AHDB, Agro Popular, Agro Times UA, Milk News, Milk UA, Portal do Agronegocio, Spec Agro, Tyrokomos, Veeteelt
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