After years of tight milk supplies keeping dairy farmers on edge, the global dairy market has flipped like a pancake in a skillet. Milk production is now growing faster than a weed after spring rain, creating a massive oversupply that’s sending butter and cheese prices tumbling worldwide.
The numbers tell a striking story. Milk supply growth turned positive at 0.5% from the Big 7 export regions in the second half of 2024. For the first time since 2020, forecasters expect 0.8% milk supply growth across all major regions in 2025. This synchronized growth is happening in the US, EU, New Zealand, and South America all at once, like a perfectly choreographed dance that nobody ordered.
Milk supply is surging globally for the first time since 2020, with synchronized growth across all major dairy regions.
Argentina leads the charge with production surging 10.9% in the first quarter thanks to improved weather conditions. Meanwhile, New Zealand’s Fonterra expects milk solids volumes to climb several percent in 2025-26. Even the EU is seeing modest milk delivery increases with stocks building in early 2025.
This milk tsunami is hammering prices across the board. The Global Dairy Trade index dropped 4.3% at the latest auction, with butter prices taking the biggest hit at a 12.4% decline. Chinese farmgate milk prices have fallen near 10-year lows, forcing farmers to reduce their herds just to survive. Despite the price pressure, dairy farmers are benefiting from affordable feed costs that help cushion the impact on their bottom lines.
The oversupply problem becomes crystal clear when looking at the bigger picture. Total milk production is outrunning global demand by the end of 2025, despite record US exports jumping 53% in July 2025. This surge in dairy production continues a trend from 2023 when global milk output reached 965.7 million tonnes, representing a significant acceleration compared to previous years. US dairy exports reached $4.72 billion midway through 2025, representing a 15% volume increase that still couldn’t absorb all the extra milk sloshing around. While this dairy downturn mirrors the widespread pessimism seen in financial markets during major declines, patient investors often view such periods as potential opportunities.
Even with some bright spots in demand, like US yogurt sales growing 6% and cottage cheese climbing 12% in 2024, it’s not enough to balance the scales. China’s imports improved 2% year-over-year after a three-year decline, but their own production challenges mean they’re still working through existing stocks.
Looking ahead, this milk abundance appears likely to continue well into 2025, keeping pressure on dairy prices worldwide.
