In the ever-evolving dairy industry, navigating through challenges and opportunities requires keen insight and strategic foresight. Amid global chaos, factors like bluetongue, avian influenza, H5N1 and foot-and-mouth disease, the dairy sector continues to demonstrate resilience.
Mary Ledman, dairy global sector strategist for Rabobank, recently shared a perspective on the current state of the global dairy market. As she collaborated with Rabobank’s team of six analysts from around the world to compile their second-quarter dairy report, they found themselves pondering the question, “Is this too good to be true?” Ledman says three clear messages stand out from the report.
1. Steady Supply in Turbulent Times
Despite an array of factors impacting milk production, cows continue their steady output.
“It’s not huge growth, but nevertheless, we’re moving forward,” Ledman says. The report showcased that 2025 will mark the first year of milk production growth for the U.S. since 2021.
Supply growth has been muted and manageable, yet the outlook is positive, with projections for more substantial gains in milk production.
“Although in the second half of this year and into 2026, we see more positive gains in milk production,” Ledman says.
2. Evolving Consumer Demand
Retail dairy prices saw deflation around the globe in nearly all regions during parts of 2024. However, higher milk and dairy product prices in the second half of 2024 have continued into 2025, which has translated into higher prices for the consumer at the retail and food service outlets. In the U.S., restaurant traffic declined for the eighth consecutive quarter, with a 7% year-over-year drop in the first quarter of 2025.
While consumers around the world face tightening budgets, the demand for dairy persists. However, consumption patterns are shifting. Whereas pizza delivery might be declining, there’s an increasing tendency to dine at home, where milk serves as a staple on the table. Such resilience speaks volumes about dairy’s enduring appeal.
3. Dynamics of Global Dairy Trade
The global dairy trade is not without its disruptions, particularly with the uncertain on-and-off tariffs. Some dairy exporters, including those dealing in butter and cheese, have strategically front-loaded their products into markets like the U.S. in anticipation of increased tariffs. Similarly, China, a significant market for whey ingredients, saw a surge in imports during the first quarter. Nevertheless, by April trade figures had dropped dramatically.
The U.S.-China tariff escalation was paused May 12, with China’s retaliatory tariff dropping from 125% to 10%. The cool-off period is for 90 days. Despite these fluctuations, there’s an optimism for a rebound in trade volumes as new opportunities emerge.
Balanced Perspective Amid Chaos
Despite global chaos, the dairy industry has managed a good supply-demand balance.
“As things calm down in the second half of the year, we could see improved consumer optimism, potentially bringing more traffic to eating establishments and boosting dairy sales,” Ledman says
The expansion within the U.S. cheese industry, which is part of an $8 billion-plus investment in processing, focuses on strategic and rational expansion plans, underscores a robust market driven by genuine demand. Ledman says that with investments in facilities to cater to this demand, the environment for U.S. dairy appears promising.
This expansion also highlights the increasing role of privately held companies in meeting product demands — a shift from cooperative-lead expansions prevalent in the past.
With targeted strategies, the U.S. now stands as a front-runner in exporting competitively priced butter and cheese, leveraging price advantages on the global stage.
While China might not hold the same allure for certain dairy imports, its modernization and enhanced dairy self-sufficiency mark a significant shift in global trade strategies. China’s dairy herd totaled 1.49 million head in 2024, a year-over-year increase of 6%.
Despite gains from large-scale farms, the exit of small-to-medium-sized farms is expected to outweigh these increases. As a result, Ledman says that the projection of total milk production in 2025 is likely to decline by 2.8%. As a major buyer of whey products, maintaining good trade relations with China remains crucial.
The interplay between dairy and beef industries showcases innovative alignment with consumer trends and the driving forces of economics. With the dairy sector adapting to meet evolving demands while extending herd lactations, the narrative of growth and sustainability continues.
In a world filled with unpredictability, the global dairy industry’s resilience, adaptability, and strategic foresight suggest a promising path forward for the U.S. dairy industry, laced with opportunities and growth on the horizon.
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