Milk tsunami is a wake-up call for dairy sector

The dairy market has once again demonstrated in recent years how non-linear it functions. What began as a period of scarcity and high prices culminated in a pronounced decline in 2025. milk tsunami: a rapid and widespread increase in milk supply that clashed with a cooling demand. The sharp drop in prices in the second half of the year was not an isolated incident, but the logical consequence of this structural imbalance.

The origins of this milk tsunami lie in a combination of factors. In the first half of 2025, milk supply in various regions was still significantly lower, partly due to animal health problems and a disrupted reproductive cycle the previous year. However, that situation changed abruptly. High milk prices, lower costs, and delayed production effects led to a remarkably strong increase in supplies in the second half of the year. Ultimately, the annual volume turned out to be only slightly lower than the previous year.

This trend break wasn't just a Belgian or Flemish issue. Large parts of Northwest Europe produced more milk than expected, while production in other major exporting regions also remained high. At the same time, Europe's export position weakened due to a strong euro. As a result, more and more milk and dairy products no longer easily found their way to the global market, but remained stuck in the European market. The milk tsunami was reflected in rising stocks and rapidly falling prices for butter and milk powder, which had a direct impact on the milk price.

Globally, this effect is further amplified. International milk production continues to grow, primarily thanks to efficiency gains per cow. At the same time, demand is less dynamic than in the past. China, in particular, the driving force behind the global dairy trade for years, is importing less. This means that volumes that used to be sold without problems are now contributing to a structural oversupply. In a volume-driven market, this inevitably translates into price pressure.

The market in 2026
The question then is whether 2026 will be the year the milk tsunami subsides. There are indications that a leveling off is possible. Policy constraints limit the scope for further volume growth. Emission reduction targets and sectoral obligations mean that production can no longer increase indefinitely. Moreover, lower milk prices will have an impact: postponed slaughters, farm closures, and reconsiderations of investment plans will gradually lead to a more moderate supply.

There are also cautious signs on the demand side of the market that a bottom may be in sight. The first international auctions and quotations of the new year are showing slight recoveries. This suggests that the worst of the price correction may be behind us, although the recovery remains fragile and highly dependent on external factors such as exchange rates, trade measures, and production developments in other exporting regions.

Yet, it would be wrong to automatically view 2026 as a calm and predictable year. While the milk tsunami may be weakening, the underlying structural tensions remain. The dairy market will remain sensitive to rapid shifts in supply, demand, and policy in the future.

Wake-up call for sector
The bottom line is clear: the milk tsunami of 2025–2026 isn't a temporary wave, but a wake-up call for the entire sector. Efficiency alone is no longer enough. Balance between production, market, and value creation will become crucial. Those who understand this can use 2026 as a year of repositioning. Those who continue to focus solely on volume risk being caught off guard by the next wave.

Cautious optimism is justified, but only when paired with strategic insight. Because in a world of milk tsunamis, it's not the biggest player who is rewarded, but the most agile.

Jan de Keyser

Is director Agri & Food BNP Paribas Fortis in Belgium. In his opinions he reflects on strategic developments in the agricultural sector.

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