Big 7 Dairy strategies in summary
- Global milk supply growth is slowing, with volumes forecast to rise around 1% in 2026 as margins tighten and weather, input cost, regulatory and geopolitical pressures build
- Cheese is capturing more of the milk pool, with Australia, New Zealand, the EU, US and Argentina prioritising cheese over butter and powders
- Higher-value protein ingredients are gaining importance, as processors shift toward premium whey, specialty nutrition and value-added dairy products rather than lower-margin commodity powders
- Export conditions remain uneven, with strong US cheese, butterfat and whey demand contrasting with weaker Chinese demand, lower EU export forecasts and South American reliance on key buyers
Global milk production is slowing following high output in the second half of 2025. Margins are tightening through a mix of rising input costs, weather risks, as well as regulatory and geopolitical pressures.
Raboresearch predicts global milk volumes will rise by around 1% in 2026, down from 3.1% in 2025, with production peaking in the second quarter, flattening in the third, and declining in the fourth.
On the commodity markets, fats and powders continue to experience demand and price volatility while protein products are supported by more stable demand dynamics.
Below, we look at how milk production and export demand across the Big 7 regions is shaping up the global dairy markets rebalance.
Australia: Cheese is where the milk is flowing
Australia is in recovery mode, but it remains a cheese-led dairy industry with rising exposure to weather risks.
Milk production is forecast to reach 8.6 mmt in 2026, a slim recovery on last year when drought and poor pasture conditions impacted output. Improved pasture conditions, strong farmgate milk prices and lower grain costs all support the rebound.
Processors are expected to allocate a large share of the national milk pool to cheese production at the expense of butter and powders, especially Skim Milk Powder (SMP). Cheese remains Australia’s leading export category, with around 175,000 mt set to be exported this year. Japan is the largest destination for Australian cheese followed by China, with Thailand and Malaysia posting strong growth, underscoring the growing importance of South East Asia as a demand driver. Singapore in particular is a stand-out from the region with milk imports up more than 20%.
Meanwhile, China’s growing focus on supporting domestic milk production means demand for some dairy commodities remains weak.
Dairy exports from Australia are becoming more concentrated around cheese, while shipments of butter, SMP and WMP face headwinds from weaker competitiveness, softer Chinese demand and higher logistics costs.
New Zealand dairy: Whey and premium proteins drive value growth
New Zealand is close to a record milk production year on the back of strong farmgate milk prices, productivity gains and herd expansion. The country is forecast to produce 22.1 MMT of milk in 2026, above the 21.93 MMT achieved in 2025 and exceeding production levels last seen in 2018 despite a significantly smaller dairy herd.
Processors are increasingly prioritising high-margin dairy products such as cheese, specialty nutrition ingredients and premium whey proteins at the expense of commodity powders. This shift is in turn supporting whey processing expansion and high-value ingredient production.
China remains a critical market, accounting for between 36% to 40% of New Zealand’s total dairy exports, and is the largest destination for powders and cheese.
As processors continue to prioritise high-value commodities, New Zealand is enjoying strong milk output and export demand dynamics. This is supporting a shift toward cheese, premium nutrition ingredients and high-margin dairy proteins.
EU dairy outlook: Fewer cows, higher productivity and weaker exports
The European Union’s milk production forecast remains flat for 2026 but the sector is offsetting herd losses through productivity improvements. This year, cow numbers are expected to fall by 0.7% but production is up 0.1% from 2025.
European processors are betting on cheese at the expense of butter and powders as the sector’s focus remain firmly on serving the growing global demand for cheese as well as expanding whey streams to support growth in the premium whey protein market.
Export sentiment is cautious, however, with EU cheese, butter, SMP and Whole Milk Powder (WMP) exports all forecast down. This dynamic is largely due to increased freight costs, weaker Chinese demand, and trade disputes all weighing on competitiveness.
With limited milk growth forecast in 2026, EU processors are routing significant volumes to cheese over lower-margin commodities such as milk powders.
Uruguay dairy exports: WMP and butter support trade growth
Uruguay’s dairy exports are having a positive year, according to data published by INALE. Revenues are up 3% year-on-year through May 2026, with growth being driven by stronger powder and butter demand while cheese exporters were down.
Algeria and Brazil continue to be the biggest destinations for Uruguay’s dairy exports, leaving the the South American country exposed to potential geopolitical volatility and trade disruptions.
Export growth is being driven primarily by WMP and butter, with Algeria and Brazil continuing to anchor demand.
US dairy exports: Cheese, butterfat and whey lead the gains
US milk production continues to expand, supporting strong export growth in 2026. Cheese, butter and whey are leading the gains amid resilient global demand.
According to US Dairy Export Council data, exports to April 2026 are up strongly year-on-year led by record cheese shipments and butterfat growth, while SMP exports are recovering more gradually, supported by demand from South East Asia.
Cheese exports year to date exports up 25.1% to nearly 238,000 mt. Rolling 12-month exports have climbed to roughly 660,000 mt, a record level. South Korea has been a major growth driver.
SMP export growth has been more modest, with exports in the year to date up 6.2% but rolling 12-month volumes remaining below the highs seen in 2021/22.
Unlike commodity whey, which is seeing strong export growth, premium whey such as Whey Protein Concentrate 80 and higher (WPC80+) volumes are lower year-to-date. This likely reflects processors’ prioritising the more lucrative domestic market, where demand for high-protein fortification is driving innovation across a diverse range of food, beverage and specialised nutrition categories.
The US dairy sector is expanding milk production and expects stronger exports in 2026, with cheese, butter and whey leading growth thanks to competitive prices and robust global demand.
Argentina and Brazil: South America’s export growth story
Argentina’s milk production is forecast to rise 4% in 2026, reaching record roughly 12 mmt thanks to favourable pasture conditions, low feed prices and productivity gains.
Domestic consumption is recovering only gradually meaning that a large share of the milk pool is being funnelled into exports, particularly cheese and WMP. Brazil and Algeria are expected to remain key destinations for Argentina’s WMP exports.
Brazil’s milk output is slowing after strong expansion in 2025 with a decline expected in the second half of the year. The country remains a major dairy powder buyer while also being central to global livestock trade as the world’s largest beef exporter.
But Brazil’s cattle cycle is beginning to tighten. Farmers are expected to slaughter fewer cows in 2026 despite strong export demand and currency pressures on the Brazilian real.
China: Still a key importer, but demand is changing
China remains one of dairy's key importers, but ample domestic milk supply and weak retail demand mean the market is in a transition. Imported WMP and SMP are now in much lower demand compared to cheese and butter, with processors responding by directing milk toward these higher-value commodities.
At the same time, foodservice, bakery and premium product demand continue to support cheese, butter and whey imports, particularly where domestic products cannot compete on quality or supply volumes.
This is increasingly transforming China into a critical swing buyer rather than a dominant importer.
