Turbulent dairy market: A global map made of dairy products experiences a storm, symbolizing price volatility.

Is Your Milkshake Safe? Unpacking the Volatility in Global Dairy Markets

Soraya Malik in Business & Economy August 2025 • 4 min read.

"A deep dive into the economic factors impacting the price of milk, cheese, and butter, and what it means for your wallet."

The price of dairy products—milk, cheese, butter, and more—may seem like a constant, but beneath the surface, global dairy markets are anything but stable. Over the past two decades, the international dairy commodity market has experienced dramatic price swings, driven by a complex interplay of factors. Understanding these dynamics is crucial for consumers, businesses, and policymakers alike.

Since 2007, dairy markets in key regions like the European Union (EU), the United States (US), and Oceania (Australia and New Zealand) have become increasingly interconnected, creating a truly global market. However, this interconnectedness also means that volatility in one region can quickly spread to others, impacting prices worldwide.

Dairy prices are inherently susceptible to volatility due to several factors. Milk's perishable nature, seasonal production patterns, and the combination of inelastic demand with fluctuating supply, make prices vulnerable. Unexpected weather events, disease outbreaks, and shifts in consumer preferences can all lead to significant price changes. Additionally, government policies and trade agreements play a crucial role, shaping the competitive landscape and influencing market dynamics.

What's Causing the Chaos in the Dairy Aisle?

Turbulent dairy market: A global map made of dairy products experiences a storm, symbolizing price volatility.

Several factors contribute to the volatility observed in international dairy markets. These include:

Global events, such as the 2006/07 food crisis, free trade agreements, and policy changes, have significantly impacted dairy price volatility. These events often trigger a ripple effect, influencing supply, demand, and trade flows across different regions.

Supply and Demand Shocks: Unexpected fluctuations in supply (due to weather, disease, or policy changes) and demand (driven by changing consumer preferences or economic conditions) can cause prices to fluctuate.
Trade Agreements: Bilateral and multilateral trade agreements can either stabilize or destabilize markets by altering trade barriers and creating new opportunities for exporters.
Government Policies: Dairy policies, such as price supports, subsidies, and quotas, can influence production levels and market prices.
Financial Speculation: Increased investment activity in dairy commodity markets can amplify price swings, especially during times of uncertainty.
Climate Changes: Global weather patterns can affect feed supply, milk production and logistics to cause disruptions and higher prices.

A recent study investigated the price volatility of four key dairy commodities – skim milk powder, whole milk powder, butter, and cheddar cheese – across three major regions: the EU, Oceania, and the US. By analyzing price data from 2001 to 2017, the study identified several factors driving volatility in the international dairy market.

Navigating the Dairy Market Maze: What's Next?

Understanding the dynamics of global dairy markets is essential for consumers, businesses, and policymakers. By recognizing the factors that contribute to price volatility, stakeholders can make informed decisions and mitigate potential risks. As global events continue to shape the dairy landscape, adaptability and proactive strategies will be crucial for success.

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Everything You Need To Know

What are the primary dairy products whose prices are most susceptible to global market volatility?

The dairy products most susceptible to global market volatility include milk, cheese, and butter. These products, along with others, are significantly impacted by factors such as global events, trade agreements, and regional policies. Understanding the dynamics affecting these products is crucial for consumers, businesses, and policymakers to make informed decisions and mitigate risks.

How do trade agreements impact the prices of dairy commodities like skim milk powder, whole milk powder, butter, and cheddar cheese?

Trade agreements can either stabilize or destabilize dairy markets by altering trade barriers and creating new opportunities for exporters. These agreements can influence supply, demand, and trade flows across different regions, impacting the prices of commodities like skim milk powder, whole milk powder, butter, and cheddar cheese. The effects of trade agreements are a key factor in the volatility observed in the international dairy market.

Why does the interconnectedness of the European Union (EU), the United States (US), and Oceania (Australia and New Zealand) dairy markets contribute to global price instability?

The interconnectedness of dairy markets in the European Union (EU), the United States (US), and Oceania (Australia and New Zealand) means that volatility in one region can quickly spread to others. This interconnectedness has been growing since 2007, creating a global market where disruptions in one area can rapidly influence prices worldwide. This rapid spread is due to the ease of trade and the sensitivity of dairy product prices to supply and demand fluctuations.

What are the key factors causing price volatility in the global dairy market?

Several factors contribute to price volatility in the international dairy market. These include supply and demand shocks, trade agreements, government policies, financial speculation, and climate changes. Unexpected fluctuations in supply due to weather, disease, or policy changes, and demand driven by changing consumer preferences or economic conditions, can cause significant price changes in dairy products like milk, cheese, and butter.

How can consumers, businesses, and policymakers navigate the volatility in global dairy markets?

Understanding the dynamics of global dairy markets is essential for consumers, businesses, and policymakers. By recognizing the factors that contribute to price volatility, such as global events, trade agreements, and regional policies, stakeholders can make informed decisions and mitigate potential risks. Adaptability and proactive strategies are crucial for success as global events continue to shape the dairy landscape.