This chapter describes market developments and medium-term projections for world dairy markets for the period 2025-34. Projections cover consumption, production, trade and prices for milk, fresh dairy products, butter, cheese, skim milk powder and whole milk powder. The chapter concludes with a discussion of key risks and uncertainties which could have implications for world dairy markets over the next decade.
OECD‑FAO Agricultural Outlook 2025‑2034
Abstract
Dairy products continue to be highly valued by consumers as a key component of an overall healthy, balanced and nutritious diet. As income and population increase, more dairy products are expected to be consumed globally over the medium term.
Asia, particularly India and Pakistan, will continue to have the strongest growth in consumption of fresh dairy products. Further increases in cheese consumption are expected in Europe and North America.
Global milk production is expected to grow steadily, primarily driven by higher yields per animal. World milk production (81% cow milk, 15% buffalo milk, and 4% for goat, sheep and camel milk combined) is projected to grow at 1.8% p.a. over the next decade fuelled by increasing yields per animal, with growth in the number of cows expected to be moderate.
More than half of the growth in milk production is anticipated to come from India and Pakistan. Whereas milk production in the European Union, the second largest producer, is expected to slightly decline.
Environmental and health concerns are shaping the projections for the dairy sector. In some countries, dairy production accounts for a substantial share of overall greenhouse gas emissions (GHG), resulting in initiatives to adjust dairy technology with an aim to reducing such emissions.
Only a small share of milk is traded internationally mainly in the form of processed dairy products. Although milk production in the three major dairy exporters, New Zealand, the European Union, and the United States is expected to increase modestly, their exports are projected to jointly account for nearly 70% of global milk exports.
The gap between butter and skimmed milk powder prices is expected to persist throughout the projection period. This development is attributed to a relatively stronger demand for milk fat compared to non-fat milk solids on the international market. The fat and non-fat solid contents of milk changes only very slowly.
The dairy sector faces several uncertainties. In high-income countries plant‑based replacements increase their uptake albeit from low levels, their market share might increase faster than assumed in the Outlook. Animal diseases are not assumed to constrain production significantly, but they can always cause disruption as the current transmission of avian influenza to dairy cattle highlights.
Dairy and milk prices increased in 2024 driven by higher butter prices
In 2024 the FAO Dairy Price Index increased driven by higher butter prices which reached a new high in mid-2024 and remained high thereafter. This increased the price spread between the fat and non-fat component of milk.
World milk production grew 1.1% in 2024 to about 950 Mt. In India and Pakistan, production increased by 3% to reach 227 Mt and 66 Mt respectively, but with little impact on the world dairy market as they export only marginal quantities of milk and dairy products. Among the three major exporters, production in 2024 increased in New Zealand and the European Union, but declined in the United States.
World dairy trade continued to decline in 2024 due to the considerably smaller import demand from The People’s Republic of China (hereafter “China”), especially for skim and whole milk powder (SMP & WMP). However, other major importers of dairy products—Saudi Arabia, Algeria, Indonesia and Mexico—increased their imports. Going forward, of the major exporters, the United States would be a beneficiary of any additional export demand due to constrained production growth in the European Union and New Zealand.
6.3.1. Consumption
Strong demand in India and Pakistan is leading increased global dairy consumption
Although milk is a highly perishable product which must be processed shortly after collection, most milk is consumed in the form of fresh dairy products1, including those fermented and pasteurised. The share of fresh dairy products in global consumption is expected to increase over the next decade due to stronger demand growth in India and Pakistan, which in turn is driven by income, urbanisation and population growth. World per capita consumption of fresh dairy products is anticipated to grow by 1.0% p.a. over the coming decade, primarily driven by higher per-capita income growth.
Milk consumption per capita (in terms of milk solids) varies widely across countries (Figure 6.1), driven by differing income levels and regional preferences. The most significant growth is expected in India and Pakistan, where milk solids consumption is expected to increase to 30 and 46 kg per capita, respectively. The average fresh dairy consumption per capita in China is significantly lower than in the European Union and North America but a strong increase is expected over the coming decade. In low- and lower middle-income countries most of the production is consumed in the form of fresh dairy products.
In Europe and North America, overall per capita demand for fresh dairy products is declining but the composition of demand has been shifting over recent years in favour of dairy fat such as full-fat drinking milk and cream. Plant-based dairy replacements are increasingly established and competing more with fresh dairy products than with processed dairy products.
The share of processed dairy products, especially cheese, in overall consumption of milk solids is expected to be closely related to incomes, with variations due to local preferences, dietary constraints, and urbanisation. The largest share of total cheese consumption, the second most consumed dairy product, occurs in Europe and North America, where per capita consumption is expected to continue to increase over the projection period (Figure 6.2). Considerable cheese consumption in emerging markets is linked to the consumption of pizza and burgers. Butter consumption has seen a recovery in North America and Southeast Asia due to shifting preferences. In addition, per capita consumption of butter, especially in the form of ghee, continues to increase from already high levels in India and Pakistan, although consumption of processed dairy remains low.
The dominant use of SMP and WMP will continue to be in the manufacturing sector, notably in confectionery, infant formula, and bakery products. A small share of dairy products, especially SMP and whey powder, are used in animal feed. Whey powders are gaining prominence globally because of their use in the processing of nutritional products, especially of clinical, infant, and elderly preparations and as an import alternative for reconstituted fresh dairy products, such as milk and yogurt especially in Africa and other regions with limited milk production.
6.3.2. Production
Greater efficiency in milk production from yield growth
World milk production is projected to grow at 1.8% p.a. (to 1 146 Mt by 2034) over the next decade, faster than most other important agricultural commodities. Growth in the number of cows is expected to be moderate in North America and China, but strong in Sub‑Saharan Africa and in major milk-producing countries such as India and Pakistan–where yields are low. Yields across the world are expected to grow steadily and to contribute more to production increases than herd growth over the next decade. This yield growth will be achieved through optimising milk production systems, improved animal health, greater feed efficiencies and improved genetics.
India is the largest producer of milk and is expected to achieve a continued strong production growth (Figure 6.3). Production is based on small operations connected to cooperatives for processing and distribution. This integration into wider supply chains is important for the value added by the dairy sector in India. The growth is expected to come from more milking cows and buffaloes as well as from yield increases.
Production in the European Union is projected to stagnate with fewer dairy cows and slower yield growth. Production originates from a mix of grass- and feed-based production systems. A growing share of milk is expected to be organic or from other non‑conventional production systems. At present, more than 10% of dairy cows are within, but not limited to, organic systems located in Austria, Denmark, Greece, Latvia, and Sweden. Germany, France and Italy have also seen an increase in organic dairy production. However, as organic yields are about 75% of those in conventional production systems and organic systems incur higher production costs, they need to command a substantial price premium to be profitable.
The average yields per cow in North America is four times higher than the global average, as their share of grass-based production is low, and feeding is focused on high yields from specialised dairy herds. Dairy herds in the United States and Canada are expected to remain largely unchanged and production growth to originate from further yield increases. As domestic demand is projected to remain stronger for milk fats, the United States will continue to expand SMP production, partly for export.
Although the share of New Zealand in world milk production is only 2%, it is the most export-orientated country. After expanding strongly, milk output growth has slowed down in recent years, and is projected to grow at 0.9% p.a. over the next decade. Milk production is mainly grass-based, and yields are considerably lower than in North America and Europe. However, the cost efficiency of grass management allows New Zealand to be competitive due to the focusing on milk yields per hectare. The main constraining factors for growth are land availability and increasing environmental restrictions (Zero Carbon Amendment Act of 2019 to the Climate Change Response Act of 2002). Nevertheless, a shift to more feed-based production systems is not likely.
Strong production growth is expected in Africa, mostly due to larger herds (Figure 6.4). These will usually have low yields, and a considerable share of milk production will come from goats and sheep. Most cows, goats and sheep graze, and are used for other purposes including meat production, traction, and as capital assets (savings). Additional grazing occurs on the same pasture, leading to a more intensive use which may lead to local over-grazing. Over the projection period, about a fifth of the global dairy cow and buffalo population is projected to be in Africa and to account for around 5% of world milk production.
Note: The size of the bubbles refers to the total cow milk production in the base period 2022-24.
Source: OECD/FAO (2025), ''OECD-FAO Agricultural Outlook'', OECD Agriculture statistics (database), http://data-explorer.oecd.org/s/1hc.
Dairy is one of the agricultural sectors with an above average direct greenhouse gas emission. The International Dairy Federation (IDF) has been engaged in the reporting of dairy emissions for several years. To help the global dairy sector, from farming to processing, to have a robust benchmark for calculating carbon footprints for pre‑competitive discussions and to make continued progress in both researching and applying new technologies in effectively reducing the sector’s greenhouse gas emissions, IDF developed a common carbon footprint approach for dairy2.
Globally, around 30% of milk will be further processed into products such as butter, cheese, SMP, WMP, or whey powder in the coming decade. However, there are notable regional differences. In high-income countries, most of the milk production is transformed into dairy products. Butter and cheese currently account for a large share of consumption of milk solids in Europe and North America due to the significant direct food demand for these products. SMP and WMP are largely produced for trade, for use in the food processing sector, notably in confectionery, infant formulae, and bakery products. In low and lower middle-income countries most of the milk production goes into fresh dairy products.
6.3.3. Trade
Milk is traded internationally mainly in the form of processed dairy products
Most dairy products are domestically consumed. Only a small share (less than 7%) of world milk production, is traded internationally, primarily due to its perishability and high-water content (more than 85%). About 50% of world production of WMP and SMP is traded since these products are often produced only to store and trade milk over a longer time period or distance. Fresh dairy products such as fermented milk products are traded in small amounts between neighbouring countries–Canada–and the United States, or the European Union and Switzerland, for example. An exception is imports of liquid milk by China from the European Union and New Zealand, made possible by Ultra-High Temperature milk and cream products capable of being shipped long distances, but also favourable Chinese freight rates in some cases.
World dairy trade is projected to expand over the next decade to reach 13.8 Mt in 2034, 12% higher than during the base period. Most of this growth will originate in the United States, the European Union and New Zealand. These three exporters are projected to jointly account for around 64% of cheese, 69% of WMP, 73% of butter, and 78% of SMP exports in 2034 (Figure 6.5). Australia has lost market shares although it remains a notable exporter of cheese and SMP. Argentina is also an important exporter of WMP and is projected to account for 6% of world exports by 2034. In recent years, Belarus has become an important exporter, orienting its exports primarily to the Russian market due to the Russian embargo as of 2015 on several major dairy exporting countries.
The European Union will continue to be the main world cheese exporter, followed by the United States and New Zealand. The United Kingdom, Russian Federation (hereafter “Russia”), Japan, Mexico and Saudi Arabia are projected to be the top five cheese importers in 2034. Since consumers value variety, these countries are often also exporters of cheese and international trade is expected to offer wider choices of cheeses in the domestic markets.
New Zealand remains the primary source for butter and WMP on the international market, and its market shares are projected to be around 46% and 59%, respectively, by 2034. China is the principal importer of WMP from New Zealand. The expected growth in domestic milk production in China will limit the growth in WMP imports.
The United States is expected to be the most dynamic large exporter over the next decade and to expand SMP exports especially. This would require growth in drying capacity beyond current investments. SMP imports are dispersed globally as it is often the easiest dairy product to trade for use in food processing.
Imports are spread more widely across countries, with the dominant destinations for all dairy products being the NENA, high-income countries, Southeast Asia, and China (Figure 6.6). China is expected to continue to be the world’s major dairy importer. WMP imports into China are projected to represent 12% of global imports in 2034, a 7.5 percentage point drop from the base period. Africa is expected to increase its imports of WMP considerably over the next ten years. Per capita consumption of dairy products in China is relatively low compared to traditional markets, but there have been significant increases in demand over the past decade, with growth projected to continue. Most of its dairy imports are sourced from Oceania, although in recent years the European Union has increased its exports of butter and SMP to China.
The global whey powder market is growing driven by rising demand for diets high in protein and animal feeding. Trade of whey powder is expected to increase over the medium term with China the top import market mainly for animal feed additives. The European Union is projected to remain the dominant exporter of whey powder, which together with the United States account for more than 40% of the world exports.
While some regions, such as India and Pakistan, are self-sufficient, total dairy consumption in Africa, Southeast Asian countries, and the Near East and North Africa (NENA) region is projected to grow faster than production, leading to an increase in dairy imports. As liquid milk is expensive to trade because of its high volume/value ratio, this additional demand growth is expected to be met by milk powders, where water is added for final consumption or further processing. Imports by the NENA region are expected to originate primarily from the European Union, while the United States and Oceania are expected to be the main suppliers of powders to Southeast Asia.
6.3.4. Prices
Nominal international dairy prices will gradually and slightly increase
International dairy prices are prices of processed products from the main exporters in Oceania and Europe. The two main reference prices are butter and SMP, where butter is the reference for milk fat and SMP for other milk solids. Milk fat and other milk solids together account for about 13% of the overall weight of milk, the remainder being water. Since 2015, the price of butter has increased considerably more than SMP. Increased demand for milk fat resulted in a price gap emerging between the two products and the price of butter will continue to be supported by stronger demand for milk fat compared to other milk solids on the international market. Therefore, the gap between the price of butter and SMP is assumed to remain a defining feature over the coming decade.
Prices of butter are expected to decline over the next two years as correction to the record annual butter prices in 2024. Thereafter, butter and SMP prices are foreseen to increase slightly in nominal terms over the projection period while maintaining their considerably different levels (Figure 6.7). World prices for WMP and cheese are expected to be affected by butter and SMP price trends, in line with the respective content of fat and non-fat solids.
The strong historical volatility of international dairy prices stems from its small trade share, the dominance of a few exporters, and a widely restrictive trade policy environment. Most domestic markets are only loosely connected to those international dairy prices as fresh dairy products dominate consumption, and only a small share of milk is processed as compared to that which is fermented or pasteurised.
Environmental and health concerns are becoming more significant
More restrictive environmental legislation than currently assumed in the Outlook could have a strong impact on the dairy production projections. GHG emissions from dairy activities make up a significant share of total emissions in some countries, such as New Zealand and Ireland, and more stringent environmental policies and initiatives such as the Pathways to Dairy Net Zero launched in September 2021 by the dairy sector could affect the level and nature of dairy production to curb such emissions. The growing trend towards sustainable practices such as those related to water access and manure management are associated areas where policy changes could impact on dairy production. Nevertheless, stricter environmental legislation could also lead to innovative solutions that improve the long-term competitiveness of the sector. Overall, the global level of GHG emissions from dairy production will largely depend on efficiency gains in India and other countries with high cattle populations and extensive production. In addition, extreme weather events, already experienced in some countries and regions, could aggravate the viability of milk production in the affected countries.
Plant-based dairy alternatives (e.g. soybean, almond, rice, and oat drinks) have increased in popularity in many regions, especially in North America, Europe and East Asia. Available replacements have continued to expand beyond the more traditional options, branching into various sources from nuts, legumes and other crops. Key drivers of the expansion include health concerns and increasing consumer awareness of the environmental impact of dairy production, and lactose intolerance. The growth rates of plant-based replacements for dairy products are strong, albeit from a low base, although the evidence regarding their environmental impact and relative health benefits is contested. The growth of plant-based dairy alternatives could be both considerable faster that included here, but also limited which would result in a changing demand for dairy products.
Dairy trade flows could be substantially altered from the Outlook by changes in the trade environment. Modifications to existing trade agreements or the creation of new ones, could affect dairy demand and trade flows. In addition, India and Pakistan, the big dairy consuming countries, are not assumed to integrate into the international dairy market as domestic production is projected to expand fast enough to respond to growing home demand.
Another challenge faced by the sector is the risk of disease outbreak. The recent outbreaks of Avian Influenza in dairy cattle in the United States is a reminder of this threat: from March 2024 to March 2025 about 1 000 cases in 17 states were reported.3 The risk of disease outbreaks has also been highlighted by three foot and mouth disease (FMD) outbreaks in the European Union in January and March 2025. As the world is increasingly inter-connected through trade, including trans-boundary movement of animals, animal disease could rapidly spread across the borders and disrupt dairy industry growth, which however, is not assumed to affect the industry in the Outlook.
← 1. Fresh dairy products contain all dairy products and milk which are not included in processed products (butter, cheese skim milk powder, whole milk powder, whey powder and, for few cases casein). The quantities are in cow milk equivalent.
← 2. International Dairy Federation. (2022), “The IDF global Carbon Footprint standard for the dairy sector”, Bulletin of the IDF n° 520/2022, https://doi.org/10.56169/FKRK7166.
← 3. HPAI Confirmed Cases in Livestock: https://www.aphis.usda.gov/livestock-poultry-disease/avian/avian-influenza/hpai-detections/hpai-confirmed-cases-livestock.