These 5 factors will influence the dairy market in 2025

Despite the fact that the dairy market is currently in solid shape, the milk prices at FrieslandCampina, A-ware and Lactalis Leerdammer, among others, a step back in the new year. At the same time, prices of €55 per 100 kilos for January can still be called particularly good, although the costs also have a significant impact on dairy farmers. For dairy farmers, it is therefore essential that the market holds its ground. We list a number of factors that influence sentiment and close with a conclusion. 

1. Shrink livestock population in our own country
The shrinking livestock population has been gripping the sector for some time now and will continue to be a major issue this year. ZuivelNL is holding out for 2025 a shrinkage by -2,5%, which would amount to approximately 290 million kilos. At first glance, this is still a cautious estimate. The final score of the National Termination Scheme (Lbv-plus) shows that 418 dairy farmers had submitted their application. A sloppy 3% of the companies. Almost 250 companies are closing down permanently, as is known. The mutual battle between processors to bind Dutch dairy farmers to them will continue in full force in 2025. The milk price of an individual producer cannot lag much behind in order to remain competitive. In other words: processors cannot afford to make a mistake in the market. 

2. Bluetongue and FMD in EU, bird flu in US
The outbreaks of bluetongue caused many problems in the European dairy farming sector last year. In both the Netherlands and Germany, milk production stagnated considerably last summer. Dairy trader Hoogwegt even called this one of the biggest market disruptors in the recently published annual report. Vaccinating cows against bluetongue is possible, but it is expensive and not always effective. The midges are not active in the winter, but the virus is likely to re-emerge at higher temperatures. In any case, no European money will be available to combat bluetongue from 2025 to 2027, as was announced at the beginning of 2025. The recent outbreak of FMD in Germany is something to keep in mind this year. 

In the United States, dairy farming is struggling with bird flu. California, the largest dairy state, is being hit particularly hard. More than seven hundred dairy farms have been affected there. As a result, the governor has declared a state of emergency. At 1,34 million tons, California's supply in November was 9,2% below last year's level. In September, milk supply was still the same as in the same month in 2023. Milk production in the Golden State is being hit hard. An increase in supply throughout the US has given way to a decrease in November. 

3. Weak euro
For the first time since October 2022, the exchange rate of the euro almost equal to that of the US dollar. Since September 2024, the European currency has lost more than 10% of its value against the dollar. For dairy exporters, who see their position on the world market improve as a result, this is of course good news. European products are therefore more competitive than, for example, American products. On the milk powder market, the price difference between American and European products has increased considerably, also expressed in dollars. This is because American milk powder prices rose considerably in the second half of 2024, while the European market stagnated. This may help to relax the difficult milk powder market in the year that has just started.

4. Trade tariffs above the (dairy) market
The big question is how the unpredictable Donald Trump will act after he takes office as US president in a week. You can almost bet that he will come up with new import tariffs. Trump said just before the election that 'tariff' is his favorite word. He has China in particular in his sights. China will probably retaliate with levies on American soy, meat and dairy (particularly powdered milk). 

Trump did conclude a free trade agreement with neighboring countries Mexico and Canada at the end of his first term: USMCA. This is the successor to the former NAFTA, which he called the worst trade agreement ever. However, Trump is no longer satisfied with the current USMCA and therefore wants to renegotiate with both neighboring countries. This could affect global dairy trade. Canada has already announced that it will take countermeasures if Trump comes up with import duties. 

5. Chinese milk surplus to continue for a while
The Chinese dairy market was characterised by a large oversupply in 2024 due to the rapid increase in milk production in recent years. The Chinese Ministry of Agriculture announced in December that the oversupply will continue in the first half of this year. The market could become more balanced from July onwards, although this also depends heavily on the Chinese economy and demographics. The economy is faltering due to various factors, causing consumers to consume less dairy. In addition, the number of child births has been under persistent pressure for years. The Chinese government has taken measures to reduce the number of cows, including through slaughter premiums. As a result, Chinese milk production is expected to fall from 2025 to 42 million tonnes in 41.

For the time being, the prospects in China for European exporters are moderate. This also explains the continuing price pressure on the milk powder market. Opportunities for additional sales should mainly be sought in other regions, such as the Middle East and Africa. Especially since China and Europe have a trade dispute over the import tariffs on Chinese electric cars. As a countermeasure, China started an investigation into 'improper' European subsidies to the dairy farming and dairy sector. FrieslandCampina is one of the companies on the list that is being investigated. 

Conclusion: limited pressure on milk price 
In general, there are both price-depressing and price-supporting factors that will influence the dairy markets in 2025. The good sentiment on the butter and cheese market is mainly based on tight stocks and excellent sales opportunities in Europe. As long as milk production does not increase too much, stocks will probably remain tight. The milk powder market, which is highly dependent on sales outside Europe, has been faltering for some time and therefore offers little support to the milk price. The calculated raw material value of milk is around €55 per 100 kilos at the beginning of January, according to data from DCA Market IntelligenceThe pressure on Dutch milk prices at the beginning of 2025 is therefore limited. Much further price decreases are therefore not likely in the coming months.