While the world’s top dairy-exporting regions are ramping up production, China is moving in the opposite direction, finds a recent RaboResearch report.
After years of growth, Chinese milk production shrank in 2024, and Rabobank forecasts a 2.6% decline in 2025 – marking the second consecutive year of contraction.
With farmgate milk prices 15% lower year-over-year in February, Chinese farmers have little incentive to expand output.
At the same time, Beijing is signaling plans to boost domestic demand. In a rare move, President Xi met with private sector leaders – including dairy industry executives – for the first time since 2018, hinting at potential economic stimulus measures.
Higher prices, lower feed costs
The global dairy market is on track for modest growth in 2025, driven by a steady expansion in supply and rising export demand, despite evolving trade dynamics, reports the Rabobank team.
Key regions like the EU and the US are expected to lead production increases, while dairy farmers worldwide anticipate higher revenues due to elevated milk prices and lower feed costs.
However, consumers may face higher retail prices, and potential trade challenges loom as the US shifts its global alignment.
Trade wars heat up
In the US, escalating trade tensions pose a serious threat to dairy exports. Cheese exports to Mexico – America’s largest dairy market – jumped 30% year-over-year in 2024, while China accounted for 42% of US whey exports. But with new tariffs and potential retaliation, export declines could drive US milk prices down, disrupting global dairy markets.
Starting March 10, 2025, China will impose retaliatory tariffs on US agricultural products, including:
- 15% tariffs on chicken, wheat, corn, and cotton
- 10% tariffs on sorghum, soybeans, pork, beef, seafood, fruit, vegetables, and dairy
Meanwhile, China’s investigation into European dairy subsidies – launched in response to EU tariffs on Chinese electric vehicles – could lead to restrictions on European dairy imports, with a decision expected in early 2026.
New Zealand’s dairy boom
New Zealand’s dairy sector is riding high on record-breaking milk prices, fueling the strongest farmer confidence in a decade, reported Federated Farmers NZ. With bullish 2024-25 price forecasts, the industry is watching how this optimism translates into production during the spring peak of 2025, a key indicator for the global market’s second half.
South America’s currency wild card
In South America, exchange rate volatility continues to shape dairy trade. The recent strengthening of the Argentine peso could pressure exports, as domestic sales become more attractive to producers, noted the Rabobank experts.
Disease risks loom in Europe
The EU faces renewed animal health threats, with concerns about a resurgence of bluetongue, particularly if new strains emerge and vaccine effectiveness remains uncertain. Meanwhile, Germany has successfully contained its first foot-and-mouth disease (FMD) outbreak in over 30 years, leading to eased restrictions.
